Brexit has now technically happened.  We are, however, still in a transition period, while the details are being negotiated.  In other words, it’s still very much anyone’s guess what Brexit is going to mean in practice.  That means business have roughly a year to prepare themselves for all possible outcomes and, in particular, a worst-case scenario.

Could there be a post-Brexit credit crunch?

The short answer to this question is yes, for the simple reason that nothing can be ruled out.  This may be unwelcome news, but it could also give businesses the motivation they need to look at how they are running their operations and see what steps they can take to protect themselves.  Here are some suggestions.

Check your invoicing process is as good as it could be

You can’t blame customers for not paying invoices promptly if you’re not actually sending them.  Similarly, payments won’t be doing you a lot of good if they come in the form of a pile of cheques you’re too busy to take to the bank. 

While non-payment/late-payment issues and general credit control are just a fact of business life, if you’re continually experiencing payment issues, then you have a systemic problem and you need to address it.  This could be something as simple as updating the payment methods you accept to make it easier for customers to pay

Clean up your cash flow

Similar comments apply to your cash flow in general.  Again, it’s far from unusual for there to be peaks and troughs in your cash flow.  These will often coincide with your general business cycles.  Obviously, you should aim to budget effectively so that you have enough money set aside during your “feast” periods to see you through your “famine” periods.  This can be something of a challenge, so here are a couple of tips.

Wherever possible, think access rather than ownership

Owning assets may sound nice and in some cases it can be, but only if you can really afford to purchase them.  In other words, if you can buy assets without causing disruption to your cash flow, then you may want to consider it.  If, however, buying assets would cause disruption to your cash flow, then your cash flow should almost always take priority.  Think of hiring, leasing, renting (or just borrowing) rather than buying assets.

This concept applies to staff too.  There are advantages to having permanent staff who are dedicated to you, but only if you’re sure you will need them over the long term, even if that’s just the length of a temporary contract.  Managed services, freelancers and agency temps can give you the skills you need without extended hiring commitments.

Create sinking funds and make sure you have full insurance

For the most part, you generally want to avoid capital expenditure and focus on operating expenses.  If, however, you know you’re going to have to make purchases in the near future, then you need to budget for them.  If you have a potential risk, then you need to have insurance with sinking funds to cover the excess and any possible extra expenditure.  If you think you “can’t afford the insurance”, then you certainly can’t afford the risk either and taking steps to budget for the insurance is probably going to work out less painful over the long run.

Remember lenders always value good customers

Regardless of the overall environment, the best customers get the best deals, so you want to do everything you can to make yourself a good customer.  The above steps can help a lot with this, as can any evidence that you know how to use finance responsibly.  If you’ve never used financing, you might want to think about taking out a business loan for a small amount and paying it back so as to improve your credit record.

If you need a business loan and would like to to talk to a reputable lender with a human touch, please contact us now.