What creative businesses can do to prepare for Brexit
The current challenges facing UK parliamentarians are immense and the outcomes could be epic, but the future is uncertain. This uncertainty is putting many UK businesses under strain, the creative industries included.
Anil Stocker, founder and chief executive officer, MarketInvoice
That being said, the UK's globally admired creative industries are among the UK's fastest-growing sectors, growing at twice the rate of the overall economy. So how could the current uncertainty derail these thriving businesses and how can they protect themselves?
Upon departure, the UK will cease to be a member state of the EU and all existing benefits will be lost. This could mean businesses in the creative industries facing challenges such as higher costs, delays and barriers when trading goods and services with the EU and losing funding – through EU sources but also private finance if the UK is no longer seen as a desirable investment destination.
With several different Brexit scenarios still on the table, cash flow is one thing that businesses can monitor, manage and protect. While some of the factors affecting it will be outside of your control, there are steps you can take to protect and improve your cash flow.
When forecasting cash flow, pay attention to the times when costs fall to help with managing intra-month fluctuations. Consider a variety of possible scenarios including what impact it would have if revenues exceed or fall short of forecast expectations. This could be due to a change in demand or issues affecting your supply chain.
Compare your forecasts against actual performance over time. If your projections weren’t realistic, think about how you can improve next time based on what you’ve learned during the process. Regularly review expenses to ensure they are all needed and are remaining good value for money.
Get your invoices issued as soon as possible in your customers' required format, to give your business the best chance of getting paid on time. Have a process in place for checking (and double checking) that all the required information is included and correct. For every day an invoice is late, it means more time spent chasing payment and less time to focus on growing your business. With the latest MarketInvoice Business Insights research revealing that 48% of invoices from creative businesses were paid late in 2018, there’s never been a greater imperative to mitigate the risk of lengthy gaps in cash flow.
Understand your customers: The point at which your customers settle their bills makes a huge difference to your cash flow, so drill down into the payment cycles and processes of your customers. Build your cash flow forecasts based on your customers’ payment terms and track record. Look for payment options which help make it easy for your customers to pay you quickly, such as online or contactless payments.
Be disciplined: Have processes in place for tracking invoices and chasing late payments. Your business may be big enough to employ specialist finance staff with credit control skills or you may be able to employ a bookkeeper to help. If you’re handling this task yourself, understand that different strategies may be more effective with different customers – some may respond to a friendly approach, while others will need a tougher line.
Having an invoice finance facility (funding against outstanding invoices) in place can provide valuable headroom to use as and when you need it, as well as peace of mind in case customers pay late. But bear in mind that you may be charged interest on your borrowing.
Get in touch with your bank relationship manager and accountant for support as soon as possible if you have any cash flow concerns. They can help you consider the options for your circumstances. Early communication is key here as your business credit rating may be impacted and the number of options typically decreases as a business becomes more cash constrained.
As the government navigates Brexit options, creative businesses should embrace the uncertainty – which is after all a common environment for young businesses as they grow and scale. With the right support and some careful planning, the UK's thriving creative industries can surely come out on top.
Anil Stocker is the founder and chief executive officer of MarketInvoice, a business finance intermediary, which allows businesses to sell their unpaid invoices to provide working capital.
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