From next year UK SMEs will have to be able to handle euro-based
business. How much work will they need to do to prepare for life
after the franc and the punt?
On 1 January 2002 euro notes and coins will be legal tender in 12
European countries. Austria, Belgium, Finland, France, Germany,
Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and
Spain have all opted in to the single European currency. Even
though the UK has not, companies that have links, or do business
with any of these countries will have to ensure that their IT
systems can support the new currency.
Larger organisations have the luxury of IT departments and budgets
devoted solely to the euro but for smaller companies, euro
compliance is a potentially daunting prospect.
Peter Warren, senior international trade advisor for Business Link,
the government-founded business advisor, thinks it is a
straightforward task as long as businesses do their homework now.
"euro compliancy [for the SME] is not difficult. It's only
difficult if you know nothing about it," he said.
Nor need it be an expensive procedure: Research Group AMR has
calculated that euro compliance costs an organisation, regardless
of size, 0.5% of their annual turnover.
However, the analyst organisation also found in June that only 10%
of businesses classed as small to medium enterprises were ready for
the introduction of the euro. That figure is likely to have risen
slightly since then but AMR vice-president of European research
Simon Pollard believes that no more than 20% of UK SMEs are ready.
And time is running out. Pollard says companies need to take action
now, or they will miss the boat. AMR estimates that to achieve full
euro compliance, SMEs need between three to six months. And with
just four months until the deadline, that means an immediate
reaction.
Two years ago, we were in a similar situation with Y2K compliance.
There was a mass panic in the later part of 1999 as organisations
across the world rushed to Y2K-enable their systems. Vast sums of
time, money and resources were spent on Y2K, yet when the clock
struck midnight very little happened. Analysts are concerned that
people are thinking about the euro in a similar way, and will
ignore the issue until it is too late.
"We were so obsessed with the millennium bug, which turned out to
be a non-event, that people are now turning off because they think
the euro will be the same," said Dr Rex Clark, chairman of the
Yorkshire and Humber Euro Forum which helps businesses in the
region prepare for the impact of the euro. "But this is a strategic
matter that can seriously impact on your cash flow."
By strategic, Clark points out that companies need to consider
everyday elements of the running of their business that could be
affected by the failure to prepare for the arrival of the euro.
For example, if a company in the UK is sending an invoice to a firm
in France, it will have to make sure that invoice is in Euros, or
be prepared to face lengthy delays. Price points also need to be
considered. Goods or services costing 19.99 may sound like a
tempting offer but if that figure is then converted into Euros it
may look decidedly less attractive.
Overseas businesses also need to ensure that companies they are
dealing with in the UK have a euro fund bank account and have the
ability to pay European suppliers in Euros.
So where does the SME start? "You can have a euro compliant system
by implementing a new system, or changing and modifying your old
system, which is not a small job at all," said AMR's Pollard. The
second option involves what is known as "cut over": translating
your old data format to a new format that recognises the euro.
Pollard reckons that an SME with a legacy system should regard this
as an opportunity to upgrade.
Many companies are expected to approach consultancies or services
organisations to help with their compliance projects. However, as
the deadline gets ever nearer, such services are likely to be in
short supply. Reacting now is critical.
There are some euro experts who think euro compliancy is no big
deal for SMEs. Most applications and systems that have been sold
for the past three years will be euro compliant, but it is worth
double-checking that they will be able to cope with the currency
change.
"I don't anticipate a major issue with their [SME's] readiness,"
said John Downe, customer programmes leader, euro-global
initiatives, at IBM. "There will undoubtedly be some practical
issues next year, for example the handling of cash but I'm not
making it out to be a big issue."
Downe thinks that larger companies will have a much harder job.
"For a small organisation, the complexity of what needs to be done
isn't on the same level as that of large organisations," he
said.
Be it a large or small task, cheap or costly, it is essential that
SMEs are ready for the arrival of the euro. Basic steps such as
checking your software's euro handling ability and opening euro
bank accounts will help ensure that the start of next year does not
herald a business nightmare.
There are many resources available to help SMEs with euro
projects. The Treasury has a Web site dedicated to advising on euro
procedures:
www.euro.gov.uk. There
are also 12 regional forums that have been established to advise on
best practice.
How ready are you for the euro?
Are you
satisfied your company is adequately prepared for the euro? Do you
think the government has done enough to help SMEs prepare?
We want to know what you think. E-mail CW360.com and let
us know >>