Four financial tips to get your business in great shape
2020 was a year of financial uncertainty for businesses globally as many faced an uphill battle to stay afloat. With the economic fallout of the pandemic and the new realities that the next stage of Brexit brings, 2021 looks set to be similar. In the first month of the year, for example, Mastercard already announced that it would raise its fees for UK cardholders purchasing EU goods. As such, future-proofing all financial operations and effectively managing company budgets will be crucial for those doing business internationally. To maintain upward growth, businesses must learn from the lessons of 2020. Investing in technology and the right financial tools, keeping ahead of the latest industry changes, and creating a clear continuity strategy will be paramount for success.
Here are four key tips that will keep UK companies thriving in 2021 by understanding why business leaders should implement these changes now:
1) Invest in your collaboration tools
Although many businesses will be keen to reduce expenditure and protect their budgets after a financially turbulent year, investing in a fit-for-purpose technology stack for the long term must remain a priority. This is especially true in the area of employee collaboration, particularly as the future of work seems likely to be a hybrid of both in office and remote working. Focusing on tools designed to keep employees aligned will supercharge productivity and the speed of work, allowing teams to focus on strategic growth rather than fixing fragmented communication. The likes of Slack, Zoom, and Google Drive have been keeping distributed teams connected seamlessly wherever they are based. However, it’s crucial that businesses implement the platforms that are right for them. For example, using legacy systems or overloading workers with different tools can cause productivity to stagnate, information to be siloed, and operations to become slow and exasperating. Businesses need to remember the importance of investing in their technology and ensuring they select only those tools that work best for the team, swiftly discarding those that do not.
2) Turn to digital financial options
According to recent , the global digital payments industry is expected to reach a value of $6.6trn in 2021, a 40% increase since 2019. In the current landscape, it’s more important than ever that UK businesses operating internationally take full ownership over their finances, sourcing the best services to help them continue transacting overseas. These services should be FCA regulated in the UK and approved in the marketplaces that a business wants to have a presence in. Despite the double whammy of uncertainty brought about by COVID-19 and Brexit, digital-first solutions allow businesses to carry out global sales and operations seamlessly, improving their efficiencies and overall profit margin. Platforms like , which consolidate several financial functions into one end-to-end solution, give businesses the autonomy needed to make international payments and operate with minimal disruption. Businesses can reap the benefits of avoiding the traditionally high fees that come with foreign exchange and cross-border payments, knowing they’ll be charged the interbank rate, plus a very competitive margin on top. What's more, these platforms allow for deeper integrations with accounting tools like Xero, helping to cut down admin and saving time when tracking and sending payments. This way, businesses can focus on strategic growth instead.
3) Plan for ongoing FX volatility
Between Brexit, the ongoing pandemic, and the country being plunged into a , the value of the pound is constantly changing. A 2020 of European and North American businesses found that they had lost more than $12bn in the first quarter of the year due to currency volatility. Therefore, UK businesses must stay clued up on what leaving the EU will mean for the pound against other currencies and how they can successfully plan for volatility. While fluctuating exchange rates can work in favour of some businesses, a weak pound - as is often the case currently - means higher costs for businesses relying on imports from Europe and the rest of the world. This is a double-edged sword and highlights the importance of keeping track of exchange rates when making international transactions. As the impact of pound volatility affects businesses differently, finance teams must be confident in their chosen provider’s rate and stay educated on when the best time to make a payment is. Regularly checking the mid-market rate online and securing long-term rates with merchants are both good foundations to ensure businesses are taking an approach that maximizes stability and results in their securing the most efficient transaction possible.
4) Create a financial business contingency plan
Last year proved the importance of planning for the unexpected. from the ONS showed that 42% of businesses which are still operating during the pandemic have less than six months’ cash reserves, and 3% said they had none. This worrying figure highlights just how many businesses are struggling in the current environment. To effectively survive and thrive in a volatile 2021, businesses should reflect on the lessons of the past year. The most potent contingency plans are those that provide a universal framework for companies to maintain operations even if multiple crises hit. Recessions, IT and network failures, or staff illnesses should all be taken into account. Equally, included in this should be a tailored recovery process for each one. When trying to navigate this evolving landscape, businesses need to eliminate sources of unnecessary expenditure by tracking budgets that went unused or were put to different means in 2020. This is necessary to demonstrate a clear picture of business financials and what is available, giving companies the tools they need to handle whatever 2021 throws at them.
Maintaining a business-as-usual approach in a heavily disrupted landscape is no mean feat. Many companies will be looking at how they can continue growing despite the economic obstacles in their way. Looking forward, those businesses that invest in the right tools and successfully plan for the global changes ahead will be the ones that can overcome challenges and ultimately reap the rewards that the rest of 2021 will have in store for them.
This article was contributed by Jed Rose, EMEA General Manager, Airwallex