Political and economic tumult means visibility and planning are more important than ever.
Share this article
The UK now operates a full external border with the EU as a sovereign nation. But that does not mean Brexit is over. There are specific terms which still need to be nutted out and deadlines that businesses need to be aware of.
For the time being, there are no tariffs or quotas on the movement of goods as long as they meet ritera. However there are changes related to the tax systems in regards to imports and exports.
There’s a lot going on for small businesses right now, and effectively managing cash flow is key.
We know that 65 per cent of small businesses fail because of poor financial management. To help, here’s what you can do to protect your cash flow: we’ve outlined some tips to help protect cash flow:
While the longer-term impact of challenges such as the coronavirus and Brexit are a concern for many, it’s usually the small-scale pitfalls that hurt a business the most. Visibility is key to maintaining healthy cash flow.
Look for ways to boost overall transparency. Organise a system for tracking and maintaining receipts that could otherwise get lost, and make sure all transactions are appropriately documented – including all offers, deals, and promotions across the financial year.
Upgrade your tools
The problem with financial management is often not the complicated stuff. These are things that take time, thought, and strategic intelligence, and if you have that in-house, you can handle it. Very often, the problem arises from the simplest tasks that take a lot of time and can be subject to human error.
Spreadsheets are an excellent example of this: they can quickly pile up – to the point where simply finding what you’re looking for can be tricky – and manually entering figures is a laborious process that leads to mistakes and gaps in your data.
It’s also not long before it’s out-of-date, meaning you’ll never get full visibility into cash flow health.
Automate cash flow processes, wherever possible. Whether it’s expense or invoice management, let technology handle it. Cloud accounting software such as Xero can do what your finance team doesn’t – and automation reduces the likelihood of mistakes.
This kind of software can also link to your business bank account and your point-of-sale system to track all transactions and expenses in real-time – with no data entry from you or your team.
The system pools all data to create a transparent, accessible dashboard of your financial situation – one that’s automatically updated every day. And because all information comes directly from the bank, it’s reliable and accurate.
Lean on your accountant for support with new VAT processes
The end of the Brexit transition period means that there will not be any difference in the VAT treatment of imported goods from European countries and the rest of the world.
This means that UK VAT-registered businesses will account for the import VAT on goods imported into the UK on their VAT returns. They will also need to both pay and recover import VAT on the same VAT return.
To manage this change, HMRC has established a new process called Postponed VAT Accounting (PVA). PVA gives you the option to account for and recover VAT on your imported goods using the same VAT Return form.
It’s a faster and more efficient way to complete your VAT Returns, and means you won’t have to pay your VAT upfront and recover it at a later date, which will help you manage your cash flow.
You can choose to use PVA if you:
have a UK business that is registered for VAT
import business goods to the UK valued at more than £135 (exclusive of VAT)
elect to use PVA on the customs declaration
use your own VAT registration and EORI numbers on the customs declaration
We have developed automatic PVA updates that can be used ahead of the first VAT return (around 7 March 2021 for any period ending 31 January 2021).
An accountant can help to explain and familiarise you with these changes.
Develop a comprehensive cash flow strategy
Cash flow is often misunderstood as a simple matter of being ‘in the red’ or ‘in the black’. The reality is that there is far more to it than that, and a comprehensive cash flow strategy can make all the difference.
It’s about making sure you have enough staff to make the most of spike periods. Think of the additional demands placed on the business during lockdown – and knowing how to upsell to customers, bring them back, and generally get more with less during downtimes.
A reorganisation of staff schedules at the right moment, or a strategic promotional sale can make all the difference.
Keep up to date with future changes
Decisions are still being made and the UK and the EU have not yet reached the end of negotiations. It might seem a bit overwhelming, but there is guidance available to help.