The world went to sleep last night with early polling suggesting that the Brexit referendum on whether the United Kingdom should remain within the European Union was leaning in the “stay” camp. In a surprising turn of events, when the final tallies came in, more than 17 million people voted in favor of leaving, formalizing Britain’s decision to sever its 40-year membership in the EU. So, what does that mean for your professional services firm?
The longer-term implications of this historic decision for an independent Britain will take quite some time to work out. Negotiations around the details of the UK’s departure will happen over the course of the next two years. It will undoubtedly take longer to turn all the regulatory and political changes into reality. Similarly, the impacts on economic investment, business opportunity, labor mobility, and other broader effects will certainly not happen overnight. Larger-scale political implications, such as the potential for renewed independence movements in Scotland, Wales, and Northern Ireland, will likewise take years to make their presence felt.
Nevertheless, there are some immediate effects that the Brexit referendum will have, and indeed are already having on your professional services firm. The British Pound hit a yearly high after the rumors that voter sentiment was swinging towards the “stay” camp. It crashed overnight to lows against the US Dollar not seen since 1985 once the final results came in. If you have clients in the UK, employ resources who are paid in GBP, or just travel anywhere Pounds Sterling is considered the local currency, this volatility in FX rates has a direct impact on your business. Contracts negotiated in GBP but booked in a different currency suddenly represent a little less in terms of revenue. Similarly, pre-payments made in GBP will likely result in a loss on foreign exchange as the Pound weakens. Travel expenses incurred in one currency, reimbursed to the employee under another, represented on the P&L in a third, and billed to a client in a yet another can be a true headache when FX rates experience this level of volatility. Finally, just understanding the true picture of the value of revenue and costs as FX rates change rapidly over time can be a challenge.
Services firms that run their operations with simpler tools may really struggle with keeping track of these effects. More sophisticated Professional Services Automation solutions, like Projector, that provide for a true accrual-based decoupling of billing and revenue recognition will help organizations weather this volatility much more easily. Projector, with its automatic FX rate feeds and true multi-currency project accounting handles expenses, bill rates, revenue, and invoicing in different currencies, automatically manages all the currency translations and FX variance management mechanics required. Its analytical reporting engine easily handles date-effective FX rate changes, providing clear visibility into the effect of the volatility on the bottom line.
So, whether you voted to remain, voted to leave, or didn’t give the Brexit referendum much thought at all, know that we here at Projector PSA are thinking about the implications of these sorts of events on your business and have designed capabilities into our product to help you weather the storm. While we can’t influence the big, macroeconomic and political effects of momentous decisions like a vote for independence, we’ll at least take care of the annoying details that we can so that you can focus on the bigger picture.