James Kipling, Product Manager, Quantrix
Spreadsheets are used by nearly every organization in the world. Some estimates suggest that 98% of businesses, including banks, use an Excel document at some point every single day – for tasks from the mundane such as petty case management, all the way through to business-critical functions such as budgeting, forecasting and regular financial analysis.
It’s common knowledge that the world is run on spreadsheets. But, is the world’s most ubiquitous financial planning tool really the right one for your organization?
For banks and businesses alike, building for long-term growth and success requires the right preparation, planning, and forecasting.It’s a simple concept, but every hour spent planning and preparing for growth now could end up saving 20 times that investment in future – meaning your business could be in a far better position to respond to any future market or regulatory changes. And using the right tools to get this planning right is critical for your organization.
The challenge for fast-growing businesses
For fast-growing businesses, banks and financial services organizations, the problem can be magnified. With so much going on requiring immediate attention, it can be a real challenge to see past the short term, let alone plan for scenarios that are several years in the future. Planning ahead can be a low on the list of priorities – so when a gap in the calendar does arise, it’s easy to just open an Excel document and plough ahead. After all time is short.
In the most successful companies, forecasting is the primary driver that guides strategic decision making across the business. With this in mind, its essential that forecast models are built with up-to-date and reliable data, encompass the full spectrum of possible scenarios and can be integrated with the rest of the business. This in turn, will help demonstrate the full ‘cause and effect’ of any scenario changes as they ripple through the organization. Banks today also sit on a wealth of customer data, and will need to ensure this is integrated with the rest of the business to ensure their forecasting is as accurate as possible.
With so much data available, it’s no surprise that spreadsheets are becoming increasingly complex and cumbersome.
At Quantrix, we regularly speak with banks and forward-looking organizations that are looking for a different approach. Many have found themselves in some rather unforgiving ruts: with monolithic, inflexible spreadsheets dominating the entirety of their processes, wasting vital time, money, resources, and patience.
The rise of ‘big data’ has only added to this problem. As businesses look to increase the speed and efficiency in how they analyze trends in customer and financial data, there’s often temptation to analyze historical trends using every bit of data available, using the latest and greatest business intelligence tools.In practice, the businesses with superior forecasting abilities are those that will truly thrive in an increasingly competitive market.Forecasting isn’t about having all the data. It’s about having the right data. Which is where many organizations today are falling short.
Back to the future
That spreadsheet we discussed earlier, pulled together in a rush by a time-short executive during the early phases of creating a new business, is likely to still be in use. Not only that– the spreadsheet is likely to have grown in size and complexity in tandem with the business. Originally intended to be used for basic forecasting in a start-up’s early years, workbooks like these can evolve into a large team effort, spanning different cities, time-zones and even countries as the business grows.This then becomes the go-to tool for both business analysts and the finance department.But all too often we see scenarios where multiple-versions of the spreadsheet are distributed, introducing risks and room for error to occur.
When multiple versions of a spreadsheet need to be compared, contrasted and edited to create a true ‘master file’, the integrity of data will always be in doubt. It’s also a very inefficient and time-consuming way to work. If spreadsheet versions aren’t consistently maintained, all it takes is one incorrect version being circulated for errors to start to appear. If an error is ever noticed, the lack of controls provided by typical spreadsheet software today makes it hard to determine when and where in the process any critical changes, or errors, occurred. ‘Big data’ only further adds to this minefield.
Traditional spreadsheet limitations
Traditional spreadsheets have attempted to solve problems with collaboration, but solutions such as ‘cell protection’ can make models inflexible, hard to edit, and also remove the capacity for ‘self-service modelling’, decreasing employee efficiency and productivity.
Single spreadsheets can become integral to the running of a business almost overnight and it can subsequently be very difficult for organizations to reign back their use.
Technology continues to evolve at breakneck speed, and it’s up to businesses to make sure they keep up in all aspects. Just as a paper filing system isn’t suitable for managing sensitive customer records, and Microsoft Paint isn’t the right tool for even the most talented graphic designer, the same applies to spreadsheets. Whether you are a bank, business or a financial institution, organizations today must use the most relevant technology to meet their needs which might even mean giving up traditional spreadsheets.
It sounds obvious, but using the right tools for the right job will ensure that efficiency time-drains such as formula writing, error checking and auditing are all alleviated through the use of professional features such as natural language formula writing, a built-in audit trail and a visual dependency inspector.
To truly succeed in a fast-growing environment, banks and businesses should look to implement collaborative, multi-dimensional modelling technology to enhance their financial planning and forecasting capabilities.When you’re spending thousands of pounds on capturing and analyzing data, it’s too costly to have a spreadsheet let you down. The future of your business could depend on it.
An unprecedented Black Friday: How can retailers prepare?
Retailers must invest heavily in their online presence and fight hard to remain competitive as a second lockdown stirs greater uncertainty
With an unprecedented Black Friday and Cyber Monday weekend on the horizon (27th – 30th November), eCommerce hosting and consultancy expert, Sonassi, advises retailers to strengthen their online presence and make the necessary preparations for a fatigue in consumer spending.
James Allen-Lewis, Development Director at Sonassi, explains: “This year’s golden quarter has squeezed together three of the biggest sales periods like never before, meaning retailers will have to fight harder than usual to remain competitive this Black Friday. With greater discounts over a longer period of time, alongside the fact that a second lockdown has moved everyone and everything online, retailers will be battling it out for a share of decreasing consumer spending.
“However, this sense of uncertainty should not deter merchants from implementing their sales strategies this Black Friday and Cyber Monday weekend. Instead, they must go further than simply providing online discounts and tackle challenges head on by re-focusing their efforts on creating a highly competitive user experience. Successful merchants will make the necessary preparations for a change in consumer demand and invest more heavily in their eCommerce infrastructure.
“One way in which retailers can do this is by using last year’s Black Friday as a case study to inspire their future response. For example, retailers should take note of the key consumer behaviours that transpired throughout last year’s mega peak in discounting and plan accordingly for the upcoming Black Friday and Cyber-Monday weekend.
“Tactics such as providing the ultimate online delivery service and secure payment methods will also be pivotal for retailers looking to survive a fatigue in online spending. Consumers will look to retailers who do not overpromise on items like next-day delivery and ensure their checkout process is safe and frictionless for all. It is the retailers who embrace this fact and meet the needs of the conscious consumer that will win their share of consumers wallets.
Allen-Lewis concludes: “With Black Friday and the build-up to Christmas just around the corner, retailers must adapt to changing consumer demand, invest more heavily in their eCommerce infrastructure and focus their efforts on creating the ultimate online experience. The only way to plan ahead amid challenging times is to listen to the needs of the customer.”
Optimistic outlook for 2021 public M&A
Optimism is returning and the outlook is positive for the Australian M&A market in 2021 after a COVID-induced crash in deal activity in 2020, according to Corrs Chambers Westgarth’s tenth M&A 2021 Outlook report.
The special report reveals that an environment of historically low interest rates positions M&A as a significant means of achieving growth and generating returns, including for private equity firms looking to deploy capital and strategic buyers focused on complementary acquisitions.
With the unprecedented challenge of the COVID-19 pandemic, global political instability and arguably the greatest economic challenge since the Great Depression, M&A 2021 Outlook details somewhat surprising trends emerging for the next 12 months and analyses a number of common COVID-19 myths and their influence on future M&A deal making.
Corrs’ detailed examination of the Australian M&A market draws on data taken from the firm’s proprietary database of transactions combined with in-depth research for the 12-month period ending 30 September 2020.
Key trends identified in the report include a rapid escalation in M&A levels and an increase in creativity in pricing and speed in closing deals, while also highlighting the critical need for support from target shareholders. Conditions also appear to be set for a continued rise in equity prices as a result of the ongoing influx of capital into Australian equity markets, making it imperative that bidders employ strategies to move quickly on M&A transactions.
Discussing the M&A 2021 Outlook, Corrs Head of Corporate, Sandy Mak, said “Despite a challenging year, our research indicates that 2021 could well see the volume and value of deals continue to grow. We are already witnessing this uptick in activity and while some industries and sectors are seeing a faster rebound than others, early indications are that the wider public M&A market will continue to strengthen over the coming months.”
Based on its detailed research, the M&A 2021 Outlook report discusses further key findings including:
- Deal volume and value is the lowest since 2016, however volumes have shown significant recovery since June 2020.
- More than 50% of deals in 2020 were ‘hostile’ and not recommended at the outset.
- 71% of deals over A$500 million were structured by way of a takeover – a significant increase from prior years – largely as a result of increased competition for assets through rival bids.
- Despite border closures and the tightening of foreign investment regimes, the percentage of deals with foreign bidders has increased materially since April 2020.
5 steps for SMEs to budget properly for the coming year
By Fabio Comminot, Head of Dealing, Switzerland at Ebury, one of Europe’s largest Fintechs, has provided a five-step guide to make sure budgeting is done on time.
During the challenging times of COVID-19, it is difficult to forecast orders and costs. This is especially true for SMEs that operate internationally and therefore are exposed to currency fluctuations and market movements. So budgeting is immensely important.
Autumn is budget season for most companies. Upcoming project costs, sales and fixed costs must be defined or forecasted. Budget planning should be as accurate as possible right from the start of the process to avoid unexpected consequences at the end of the year..
With the effects of the COVID pandemic it has become difficult for all companies, no matter their size or history, to plan and make sales forecasts. Early planning and hedging are especially important for companies that work internationally and are therefore particularly exposed to currency risk.
These five steps will help SMEs take the right measures for the coming financial year, in time for budget season:
Step 1: Estimate your costs or sales in foreign currencies
As difficult as it may seem, every company must estimate its expected fixed and variable costs for the coming year. Most companies can forecast their revenues based on experience or existing orders.
However, start-ups or young companies should also be able to at least estimate their costs including rents, insurance, wages and production costs. Special attention should be paid to costs or revenues that are spent or received in a foreign currency.
Step 2: Profit or cost assurance – define the strategy
As soon as an approximate plan for the coming year is in place, the company should consider the importance of currency management. Regular earnings or expenditures in foreign currencies are exposed to movements in exchange rates. If costs in a foreign currency are to be forecasted until the end of the year, the company needs to minimise volatility. This means that the exchange rate should be fixed so that there are no unexpected negative consequences at the end of the year.
Another option would be to protect the operating profit. Fluctuating exchange rates can rapidly ruin intended profit margins. In this case the company could aim to define the forecasted sales in the foreign currency and fix the margin based on this.
Step 3: Fix your budget rates
The budget is set, the currency management goals are defined, the major part is done. Now it is a matter of defining the budgeted rates for the various currencies based on the current exchange rate. A buffer of about 5% can be useful when doing this – for example. instead of fixing the exchange rate from US dollar to Swiss franc at the current 91 cent, a rate of 95 cent could be budgeted. In this way, the minimum budget rate is defined and any negative exchange rate movement can be at least partially compensated for.
Step 4: Define the hedging strategy
With the targets and the budget course set, the next questions are: What currency developments can be expected? What is the industry outlook? Is the order situation relatively secure? Or is there practically no empirical data?
This step is where Ebury can support the company. Our experts in FX markets help answer these questions and begin to define the individual hedging strategy.
Step 5: Ensure a flexible fit
It’s done: the measures have been defined, now it’s time for implementation.
Ebury will implement the previous steps and , so that the company focuses on its core business. In contrast to traditional financial services providers such as banks, Ebury constantly monitors international trade and political events in order to assist clients with strategy adjustments. The Ebury team is supported by state-of-the-art technology and international currency analysts. It makes no difference whether the changes are driven by the currency market or whether the company’s order situation itself is changing. This allows the SME to focus on its operational business, which is worth a lot in uncertain times like these.
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