As a business leader, it’s crucial that you have a complete handle over company-wide spend. Only then can you better manage cash flow and make smarter spending decision. The problem is you can only manage what you can see. And for many companies, employee spend is far from transparent.
A complete view of your outgoings is vital because it lets you respond to changing market conditions quickly and scale your operations when you need to. And it’s even more important in today’s post-Brexit environment. Uncertainty reigns supreme and survival rates among small to medium-sized businesses continue to fall.
The temptation for many companies is to sit back and see how a post-Brexit economy shapes up. But doing nothing is the most risky strategy of them all. As Article 50 has now been triggered and the details continue to be hammered out, companies need the ability to adapt quickly to fluid market conditions. In fact, it could be the difference between success and failure.
There’s never been a better time to take control and prepare for whatever the market can throw at you. With this in mind, below is what I consider to be the five best ways you can better manage your employee spend.
- Capture spend as early as possible: Despite the fact that society continues to make advancements in technology, many businesses today still handle their finance processes with a combination of paper receipts, forms and spreadsheets. This is fine for a very small business. But as a company grows, so does the administrative headache – leaving you with little visibility into your outgoing spend until it is too late.Ultimately, manual processes are slow and cumbersome, meaning finance teams only get a view of spend weeks or months after it’s occurred, making accurate accruals almost impossible.
Rather than manual processes, firms should automate their expenses and invoices. With automation, spend is captured much earlier. If workers are using an app to handle expenses, then they can submit their claims during their business trip, not three weeks later for example. And even if employees don’t submit their claims immediately – you can use data to anticipate future spend, giving you instant and accurate insights.
- Reduce errors and duplications: Manual processes are also error prone, because after all when people are involved, mistakes can happen. Therefore, you need to constantly look for steps in the process where you can remove the risk of human error. Research by Concur and Vanson Bourne revealed that many finance teams are spending a whole day a week just on admin tasks. With time-consuming and repetitive tasks such as data input, the chance of mistakes slipping through dramatically increases.
Machines, however,don’t get bored and don’t make human errors. Technology can streamline the process and save you time by automatically reading data and inputting it with a high degree of accuracy. One of the most costly mistakes made is duplicate invoice payments. A third of UK finance leaders admit to having paid a duplicate invoice. An automated system can stop this in its tracks by checking every single receipt and flagging a duplicate, saving you time and money.
- Detect and stop fraud:The lack of checks and balances in many manual finance processes makes them a natural target for fraud, both from within and out. In fact, in recent years many high-profile cases of exaggerated expense claims have highlighted how big an issue it is – just take the current Conservative election expenses scandal. It’s almost a cultural norm, and one in five(20 per cent) of employees believe it is acceptable to exaggerate their expenses.
And it’s not just internal fraud; it’s also common for scammers to submit fake invoices hoping they’ll slip through the cracks. However, there are intelligent online tools that can help. For example, built-in mileage trackers can accurately track travel expenses. Or an automated invoice service can flag invoices that don’t match purchases. These early warning systems create transparent processes – meaning you can keep a closer eye on your money.
- Comply with HMRC regulation:An HMRC investigation can be a big worry for many businesses. However, the secret to satisfying the tax inspector is to have a fully traceable and accurate audit trail underpinned by robust policies. They will want to see that spend is within policies and supported by the right documentation. This is difficult if it’s spread across spreadsheets and shoe boxes of receipts. But, with an automated end-to-end spend process, digital copies of your receipts and invoices can be found in one place. Get your processes right, and you’ll have the ability to report all of your spend, ensuring your business complies with government regulations.
- Use spend data to drive better decision-making: With manual processes, valuable decision-making data is locked in silos on spreadsheets and even on loose paper. Analysing it, and spotting trends, is time-consuming and difficult. However, if you’re able to aggregate data from multiple automated sources means you’ll be able to get meaningful insights, spot trends and take decisive action.
Ultimately, in today’s economic and geopolitical environment, finance leaders are playing an ever important role in ‘steering the ship’, helping businesses to make the right decisions. It’s not enough anymore to keep the business ticking over with old processes – they simply don’t provide you with the crucial visibility you need to maintain control over spend.
By adopting technology now and shining a spotlight on your finances, you’ll be helping to play a crucial part in future-proofing your business and ensuring its success moving forward. And what greater role can a finance leader play?
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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