Aligning Customs Strategy with Financial Goals: A Guide for CFOs

Aligning customs processes with financial goals can unlock significant opportunities for cost savings and efficiency for CFOs. Here, we explore key strategies to ensure your customs operations drive maximum business value.

Are customs operations taking a backseat in your financial strategy? Overlooking this area could lead to unexpected customs duty costs, particularly in a post-Brexit world where customs duty costs and Import VAT can quickly add up. Many businesses may not realise the financial impact customs have on their operations, but addressing this gap can unlock significant savings and minimise risk.

Why Customs Duty Costs Are Often Overlooked

For many businesses, customs processes are outsourced to agents to act on their behalf. These agents provide invoices for completing customs entries, which usually include any customs duties and import VAT incurred for the related imports. Unfortunately, if not fully understood, these costs can be recorded in a general expense code and not analysed in detail.

A lack of understanding and analysis of these costs means that businesses can end up paying more than necessary in terms of customs duties and fees without realising it. There is also the risk of underpaying duties, leading to potential audits and fines from HMRC.

Chris Hare, Associate Head of Customs at Barbourne Brook comments “Customs is often not seen as a core business process, and the costs can go unnoticed. If businesses are not managing these costs properly, they can quickly spiral out of control. By aligning customs with the financial strategy, companies can better manage these risks and identify potential duty savings and mitigation opportunities.”

How CFOs Can Gain Control

For businesses that want to take control of their customs duty costs, the first step is to review customs data. Subscribing to monthly Customs Declaration Service (CDS) data reports and using tools like CAT360 can help CFOs monitor their customs-related expenses. By reviewing the data, businesses can identify patterns, areas of overpayment, or missed opportunities for savings.

Chris Hare emphasises the importance of having robust processes in place “It’s crucial to keep an eye on your customs agents, ensuring they follow your instructions and provide the correct documentation. You should regularly check your CDS data to ensure everything is in order.”

The Financial Benefits of a Customs Strategy

When a business integrates its customs activities with its broader financial strategy, it can lead to better cost management and improved profit margins. For example, if a company is importing products with high-duty rates and does not account for this in its pricing, it can erode profit margins. A sudden customs duty payment, which has not been planned for is an unwelcome shock to cash flow, but this can be avoided with proper planning.

Ongoing Customs Management

Once businesses have a customs strategy, the key is ongoing management. Regular audits, documentation verification, and adjusting processes for new supply chains or products can help prevent issues. “It’s better to catch mistakes yourself before HMRC does,” Hare advises. “If you find an issue, notify HMRC of the reasoning and extent of the issue, explain the proposed means of remediation, and identify how you will ensure it does not reoccur in future. This demonstrates that you have the appropriate controls and processes in place to manage your customs compliance. Voluntary disclosures also ensure HMRC will not charge penalties.”

By aligning their customs strategy with their financial strategy, businesses can reduce costs, avoid penalties, and support long-term financial growth. Customs can be a significant cost, especially as your business grows; therefore, understanding and managing it is key to achieving your financial goals.

Chris Hare, Associate Head of Customs at Barbourne Brook, comments:

“Customs is often not seen as a core business process, and the costs can go unnoticed. If businesses are not managing these costs properly, they can quickly spiral out of control. By aligning Customs with the financial strategy, companies can better manage these risks and identify potential duty savings and mitigation opportunities.”