Getting Ready for Brexit

We are pleased to feature this timely article on Brexit preparedness from Ruud Van Hilten, Senior Vice President at Tungsten Network

Listening to the news at the moment, you could be forgiven for slipping into a victim mentality. With so many variables and potential outcomes on the table regarding Brexit, particularly now that the process faces delay, it is easy to feel like there is nothing an individual business can do to prepare. While it is true on a macro scale that businesses may feel powerless, at a micro level, there are still urgent, concrete things that procurement teams should do over the next few weeks to help put you on the front foot.

The number one priority

In particular, maintaining, boosting and encouraging transparent supply chain relationships should be a top priority. No matter what happens between the UK and EU, prioritising supply chain management will result in business relationships being in good order. Everyone will be ready to collaborate and react to the changing situation as it unfolds.

Good communication channels driven by agreed scenarios - so that everyone is prepared for the same events - usually result in faster responses during a crisis. This is going to be vital over the coming months if, for example, there are queues and delays at the border. Receiving regular and up-to-the-minute information from suppliers will be of utmost importance so you are able to respond accordingly. If your supply chain relationships are healthy and based on trust, you can have confidence they are doing their best to meet deadlines and together you can work out a way forward. Going forward, encourage your teams to establish a habit of communicating regularly with suppliers.

Staying on top of compliance

Will regulations change with regards to compliance in a post-Brexit era? An important factor for businesses to consider will be that in a no-deal Brexit scenario, the UK will no longer have full access to the Single Market and goods and services coming into UK from EU or delivered from UK to EU will hit a hard border. Furthermore, the UK will no longer be bound by the EU VAT Directive (EVD) currently in place and will be able to set its own specific VAT rate on certain goods and services. This change could cause further confusion when it comes to both tax compliance and reclamation. As a result, businesses operating across Europe will need to consider how automation can ensure the P2P process remains as efficient and frictionless as possible.

UK businesses will need to have contingencies in place post-Brexit to deal with the prospect of existing EU VAT mechanisms no longer being available to them. For instance, businesses can currently avoid the need to establish local VAT registration by using reverse charging, meaning that businesses are able to let the customer settle the supplier VAT. These mechanisms make it easy for UK companies to operate in countries within the single market, thereby making it harder for businesses to operate in Europe after a no-deal exit. This will be particularly detrimental to UK SMEs selling to consumers in the EU.

While individual countries are responsible for determining specific invoicing requirements themselves, it’s difficult to tell whether further changes will happen in the future. Operating across a global digital network and adopting electronic invoicing throughout your supply chain will ensure legally compliant invoices are created and enriched with required tax reclaim information, whatever comes our way after Brexit.

Modernising the back office

If cross-border trade becomes more complex, you are going to want to have the most efficient processes in place. Adopting electronic invoicing throughout your supply chain will speed up the process if there are additional customs checks and mean your business has vital paperwork in an electronic format.

Going digital also removes the friction from procure-to-pay processes and drives down operating costs. You can scale business operations more easily and improve the productivity of the AP department. It is proven to reduce the costs of handling invoices by more than 50 percent and frees staff up to focus on more added-value tasks which support business growth, rather than frustrating and time-consuming administration. It also removes the risk of fraud and reduces many inefficiencies such as duplications, errors and responding to supplier enquiries. Instead, suppliers can check invoice status online, and this reduces calls and emails by 60 percent, increasing productivity and cutting costs.

The economy is already displaying signs of weakness - recent figures from the Office for National Statistics show that for 2018 as a whole, GDP growth slipped to 1.4 percent, its lowest since 2012 – and 2019 might be quite a challenging year for all. Teams will no doubt be looking for as many ways as possible to boost profitability and eliminate inefficiencies.

Given the latest news that Brexit could be delayed until April or May depending on the decision of our MPs, it is difficult to say exactly what the state of play will be for UK over the coming months. In the meantime, there are clear areas to focus on to prepare your business for the future so that you are well equipped regardless of the outcome. In particular, nurturing supply chain relationships, taking the payment process digital can help you build a business fit for 21st century, global trade.

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official position of Spend Matters.

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