Fashion can be a tough business to be in at the best of times. Long seasonal cycles means time is largely spent planning ahead. Orders have to be in ahead of the season, and the cost of samples, manufacturing and marketing have to be covered early.
Alongside the usual cash flow issues that can come with these cycles, there are three major challenges facing our fashion industry clients at the moment:
- Brexit and its import/export issues
- COVID-19 and the long period shops were forced to shut for
- The rise of online retail and getting enough exposure for products
Because we’re seeing similar issues and questions pop up, we wanted to cover these three major challenges in more detail, and offer some quick wins to help you stay on top of your cash.
You may be facing higher costs than normal due to Brexit red tape.
British exporters to the EU are facing difficulties with mounting Brexit red tape and border disruption after a couple of months of new rules.
Many fashion companies directly involved in importing goods are facing higher taxes, increased import costs, supply chain delays and shipping delays.
The impact of Brexit on global trade over the next few years is likely to result in:
- Higher prices for many good and services
- Increased import/export costs
- Higher taxes
- Border/Customs disputes
- Supply chain shortages and disruptions
- Shipping delays
- Opting for Postponed VAT Accounting can smooth some of the cashflow burden around import
- Get expert advice to help you get your export paperwork right first time
- Plan early for the changes around selling to individuals in the EU
- Apply for a duty deferment account so you can delay paying duty on import
COVID-19 retail closures have caused immense difficulties for fashion business
On top of the Brexit drama, non-essential retail has been shut for a sustained period of time, making a considerable difference to the way we shop. There has been a surge in online purchases and click and collect options. The cost of shops being closed (with rent still due) has been immense for some retailers.
Now with the economy starting to open again there are many things to think about. Clothing shops shut in the winter season and will now be opening with spring and summer in mind, so there will be lots of products to sell off and new stock to bring in and market.
Some will be thinking of re-branding and advertising. Many will be planning how to adapt their space into a COVID-19 safe environment. Some of you will have taken business online already, and may be thinking about how to combine your e-commerce offering with an in-store return. There will be lots of ways we need to adapt moving forward in the changing world we live in now.
- Do a stock take so you know exactly what stock you hold, and highlight anything that you need to clear quickly
- Contact your landlord (again?!) to ask for a rent holiday. They will be worrying about filling empty space so you may have more leverage than you think
- If you’re feeling overwhelmed by how much there is to do on re-opening then look into the kickstart scheme to see if you can get some help without having to cover the cost for the first 6 months
Put the right systems in place so ecommerce sales can take off
The digital world is an exciting place to do business, and many of our clients in the fashion industry have seen the benefits of taking business online during COVID-19.
Though for many businesses there was very little option not to adopt e-commerce as the high street came to a stop, we’ve been seeing brick and mortar shops disappear for many years pre-COVID due to competition with online sales.
There are lots of boxes to tick to make your ecommerce venture a success. Your website or platform needs to be easy for customers to use and your product value needs to be clear, and you’ll want to use the right online tools to get your product the exposure it deserves. Here’s a helpful article from Neil Patel on the 5 Most Important Factors for Success in E-commerce.
That’s the customer side – and you’ve probably done a lot of thinking about that already. What we’re here to talk about is the back end – how to put the right financial systems in place to ensure sales can take off without creating additional stress when it comes to the accounting.
- Make sure you are giving your customers enough options around payment. PayPal and Stripe are both tried and tested and work well with accounting software like Xero. Many online retailers are starting to offer instalment payments through solutions like Klarna
- Multiple sales channels means it is critical to have a central source of truth for your stock records. Consider upgrading to inventory management software than can handle multiple sales channels. Make sure it will integrate with your accounting software. Talk to your accountant before you make a decision, and don’t be afraid to pay a bit extra to get it set up correctly from the get go
- Sketch out your process flows, and check that your systems are all talking to each other. Even something quick and easy like setting up a Stripe bank feed in Xero can save a surprising amount of time
If you only do one thing, then do this!
Many of our fashion business clients tell us they are being pulled in too many directions. Should they focus on selling off old stock, advertising on social media, investing in PR, selling online, adding new wholesale clients, or ……
Making decisions is hard. Making decisions without good data is at best a stab in the dark. The most important quick win is to overhaul your finances to give you the right information at the right time. Not sure where to start? Get in touch and ask for a Xero deep dive session.