Connect with us

Finance

Innovative finance programs help organizations save money today & prepare for future growth

Published

on

Innovative finance programs help organizations save money today & prepare for future growth 1

By John Flynn is Chief Executive Officer of Fleet Advantage

The transportation industry has continued to look for ways to absorb the drastic logistical challenges and sharp economic decline resulting from the COVID-19 pandemic.

In almost every industry, the transport of goods was disrupted significantly, with great financial impact on the bottom line for millions of companies. While some industries like health and grocers felt an uptick in demand, they still needed to deal with wide-scale logistical and supply chain disruptions and adaptations that further eroded profit margins.

Virtually every scenario placed severe economic strain on many organizations that were already operating on razor-thin margins resulting from their highly competitive nature. What’s needed are programs that offer immediate financial relief and assistance to many organizations today.

Covid-19 financial strains hit the bottom line

Like many organizations, companies with transportation fleets were adversely affected by the Coronavirus pandemic. For example, in the early days of the pandemic in March, consumers flocked to grocery stores looking for many food and household sanitization items. This forced the number of spot loads posted for transport to jump 39.1%, while the number of drivers looking for loads increased by 6.3% in March, compared to the previous year as reported by DAT Freight and Analytics1 in a story published in the Denton Record-Chronicle.

Even though the demand for loads increased, shipping rates dropped, placing further financial strain on these organizations and their bottom line. According to DAT1, the industry is facing downward returns since rates have declined 12% in April. Food distributors with private fleets certainly felt this downward trend as well. Mark Allen, CEO of the International Foodservice Distributors Association (IFDA), said recently2 the industry is expected to lose $24 billion through the end of July.

Building and construction industries are also facing financial challenges. According to PWC3, “Some construction projects have been delayed, and some canceled, as a result of the impacts of COVID-19 on the companies and governments that commissioned them. Further, possible supply chain bottlenecks of equipment and materials — including structural steel and glass from Asia — could cause project delays in currently funded projects, or reduced spending on future ones.”

Aside from handling the financial challenges, companies in many industries with private transportation fleets have had to scrutinize significant preventative measures needed to ensure the health and safety of customers, drivers, and everyone that is in contact with goods that are transported and delivered.

These organizations must rely on their asset management partners to ensure the trucks in their fleets continue to operate as efficiently as possible to safely deliver construction, food and essential goods during the COVID-19 health pandemic and containment efforts. However, these asset management partners are also adding significant value to the financial aspect of their partners’ businesses.

Companies with private fleets building more flexibility into their daily programs

It is imperative that companies with private transportation fleets recognize they must be as flexible as possible with their own business models. The health pandemic has forced some fleets to scale their truck utilization depending on their customers’ business situation. This has created a shift in some companies and the way they approach their own business and driver programs.

Some companies are suddenly in need of additional trucks to help keep up with increased capacity demand. These are immediate needs, and the structure of their truck deal needs to be flexible to meet this urgent demand. The structure must also allow them to return the asset when the impact of the current circumstances return to normal, which is an unknown at this point, even though some states are beginning to rebound slowly.

One option that works well in this type of scenario would be a Sale-Leaseback agreement. A company can select the assets that are older models, which are inefficient and more unreliable, and work with a firm that can purchase those assets and lease them back for an interim period and then transition to new equipment when ready. This would enable the company to generate cash. The cash gained can then be used for immediate internal needs or simply provide extra working capital.

A Sale-Leaseback program allows for the downsizing of fleets if an organization has a surplus of trucks, and it will have a positive effect on the bottom line P&L since the ensuing lease payment will be lower than the current depreciation charge.

The program infuses more flexibility into a market that is already seeing significantly fewer new Class-8 trucks sold in 2020. ACT’s North American sales forecast for 2020 is 151,000 units compared with the year-earlier total of 333,800.

Having additional cash on hand is critical for today, but the flexibility to upgrade to newer truck technology with advanced safety features tomorrow will help organizations come out of the pandemic with a significant competitive edge through financial and operational efficiencies gained.

Financial benefits of a sale-leaseback

  • Liquidity
  • More Efficient Use of New Capital
  • Reduction of Risk to Seller
  • Excellent Tax Treatment for Seller
  • Avoidance of Debt Restrictions

New truck upgrades cash today, newer and safer trucks tomorrow

A Sale-Leaseback program helps position companies with transportation fleets favorably for tomorrow’s competitive environment. Advanced business intelligence has helped America’s corporate transportation fleets leverage data analytics, asset management and flexible financing to identify and act upon vehicle obsolescence while sustainably driving down supply chain costs and increasing productivity. In addition, companies are now paying closer attention to their trucks’ safety obsolescence, where data shows the impact new safety technologies have on fleets, their drivers, and the savings that newer technologies and shorter lifecycles contribute to the bottom line. A recent industry survey4 revealed that 11% of transportation fleets estimate they have saved more than $1 million in crash avoidance by upgrading to newer trucks with advanced safety features.

This win-win scenario helps companies realize immediate near-term relief for the business today, while all organizations continue to do what it takes to get through the hard times of the pandemic. However, this program also helps to position businesses favorably for tomorrow through a stronger long-term financial position, with the opportunity to upgrade into newer, more efficient trucks that boast the industry’s leading safety advancements.

1:https://dentonrc.com/business/business_chronicle/trucking-transportation-industry-dealt-volatile-hand-during-pandemic/article_1dfe5cd7-36fd-5f68-862b-59024b1e2bcb.html

2:https://www.ifdaonline.org/news-insights/industry-news/24billionloss

3:https://www.pwc.com/us/en/library/covid-19/coronavirus-impacts-engineering-construction.html

4:http://info.fleetadvantage.com/fleet-advantage-survey-shows-transportation-fleets-leveraging-new-equipment-and-advanced-safety-technologies-reduce-accidents-and-litigation-exposure?hs_preview=tRwYRkKa-28475690082

Finance

One third of money management tools face closure by the end of the year if they do not embrace open banking

Published

on

One third of money management tools face closure by the end of the year if they do not embrace open banking 2
  • New research from Yolt Technology Services shows 35% of Personal Finance Managers aren’t using any open banking technology
  • Imminent screen scraping ban set to cause major disruption for consumers and businesses with just two months to go
  • 1 in 5 PFMs have never even considered using open banking
  • 28% cited data privacy as a reason for not adopting open banking technology

An international study of over 1,000 senior professionals in the banking, lending, PFM, investment, and retail sectors by leading open banking provider Yolt Technology Services has revealed that over a third (35%) of Personal Finance Management (PFM) platforms aren’t using open banking technology. These businesses will face an urgent transition when screen scraping is phased out in Europe at the end of 2020 if they are to avoid major service disruptions.

The final leg of PSD2, Stronger Customer Authentication (SCA), comes into effect in Europe on 31st December 2020 and will add an extra layer of security to log-in processes. This will force many banks to withdraw screen scraping facilities, which are currently used by PFMs to automatically extract on-screen data from the bank’s online banking page or app. This data is then used as raw text in the PFM to generate spending insights for users, but is less secure, less efficient, and creates a more cumbersome log in process.

As a result, many PFMs will have to look for alternative methods to gather customer data efficiently and securely, but despite being early pioneers of open banking, the survey showed that 35% of PFMs are not using open banking products and services such as AIS systems. In fact, nearly 1 in 5 respondents (19%) stated that they have never even considered using open banking.

More surprising still is that among those who were using open banking, only half (55%) were using Account Information Services, while over three quarters (77%) were using Payment Initiation Services (PIS). While PIS can deliver significant value for users, enabling settling between accounts or payment into regular savings accounts, its functionality is not a core part of the PFM offering in the same way as AIS.

Among those who haven’t yet adopted open banking technology, 35% of PFMs said it was too early to invest, and 28% named data privacy as the chief reason for not adopting. Despite this, PFMs do still show an above average adoption rate (68%) after being one of the first sectors to take advantage of the technology, compared with the banking and retail sectors, the next highest, on 63% and 62% respectively.

And the adoption of open banking technology is proving to be lucrative for those PFMs that do make the switch. Over 90% of PFMs who keep track of the monetary gains of open banking said that it is worth between £1m – £5m to their business each year, compared with 70% of respondents across all sectors, so there are financial gains to be had. This may be because open banking is central to service delivery for the majority of PFMs, but in other sectors it is a differentiator and its use is optional.

For all of this promise to be realised, there are clear issues to be addressed, but PFMs stand to benefit if they lead the charge.

Leon Muis, Chief Business Officer at Yolt Technology Services, comments:

“As pioneers of open banking, Personal Finance Managers have incredible potential to propel the technology even further – but only if steps are taken now to address the issues our survey reveals. That starts with more adoption – platforms which rely on manual methods of information gathering like screen scraping are not only less efficient, they deliver a worse service for users. To see a third of all PFM platforms using no open banking technology at all is a concern, and one that they will have to deal with sooner rather than later, with the upcoming ban on screen scraping.

“Data privacy concerns are a key reason behind this adoption rate, but this is built on fundamental misunderstandings not only about the technology, but the rules which govern its use. That over a quarter of PFM platforms don’t understand how open banking legislation works is a signal that we need to do better as an industry to champion the benefits of the technology, but also showcase the core safeguards and secure foundations upon which it is built.

“What is also clear is the power open banking has to differentiate platforms, and those which can most effectively implement it stand to benefit the most, both financially and in service delivery. And, with the phasing out of screen scraping coming into effect at the end of the year, PFMs need to act now to better support their customers and avoid being left behind.”

Continue Reading

Finance

Accountants have become critical to the survival of businesses and their reputations during Covid-19

Published

on

Accountants have become critical to the survival of businesses and their reputations during Covid-19 3

The opportunity for fraudulent activity to flourish as finance departments operate remotely with less oversight in these extraordinary Covid-19 times is inevitable. Government loans and financial support have been given out with little or no accountability to businesses that are struggling with the change in their trading environment and as a consequence businesses find themselves in financial need. 

There is already evidence of corporations handing back furlough grants as HMRC offers a 90-day amnesty, but without rapid data-driven insight and risk stratification, businesses may not know the extent of their exposure. Indeed many businesses face the daunting prospect of repaying loans at the same time as paying deferred VAT early next year in a far from certain trading environment. Stuart Cobbe, Director of Growth, Europe, MindBridge explains that the role of the accountant has now become critical to businesses and their reputations. 

Unlocking transparency

The Covid-19 landscape is fluid and ever-changing, and businesses require accurate visibility of all aspects of their business in order to plan effectively for the future and to understand their financial position. As the economy continues to recover to a new ‘normal’, companies need to focus on the next 6 months. How many ‘zombie’ businesses are only operating due to deferred VAT payments? How many companies will fail when they cannot repay loans? The role of the accountant is vital in unlocking this transparency to provide data-driven, actionable insights.

After all, there are many questions around how government financing has been used, from grants to loans, furlough payments to VAT deferments. As of the 20th September, the total cost of furlough claims has reached a staggering almost £40 billion, despite 30,000 applications being rejected, with many likely to have been attempts to defraud the taxpayer. Research by economists from Cambridge, Oxford and Zurich universities found that as many as two thirds of furloughed workers continued to work.

For businesses that do not understand the extent of their exposure, they risk facing a HMRC-imposed tax charge equivalent of up to 100% of the grant to which any recipient was not entitled and was not repaid. It is, therefore, interesting to see the number of large organisations now publicly revealing plans to repay all furlough payments. For many, this is an opportunity to boost corporate reputation and demonstrate a commitment to rediscovering business as usual. However, given the huge pressures businesses have been under in recent months, many CFOs and FDs may not have the full visibility they require to effectively manage this without the power of audit.

Financial Risks

This is about far more than reputational damage, the potential misuse of furlough is far from the only financial risk. The extraordinary shift in every business’ modus operandi over the past few months has opened the door for opportunistic fraud. New sources of income; staff working from home with limited oversight; the financial pressures – both business and personal – created by the recession. The misappropriation of assets should be a very real concern for businesses of every size.

For organisations that have relied upon grants and loans to survive, an employee exploiting the lack of oversight to syphon funds for personal use could tip the company into failure. Companies must determine how – or whether – deferred VAT payments and loan repayments can be made. Is the company truly solvent or no more than a ‘zombie’ business operating with a balance sheet propped up by short term government finance?

Actionable data 

Business resilience and reputation is a priority in this era, and CFOs or FDs may be struggling to establish trust across businesses now operating under a whole new range of pressures, from slimmer margins to a disjointed, remote workforce. There is an obvious need for complete visualisation of financial risks, and accountants play a crucial role in unlocking this data.

The rapid identification of mistakes in government support applications, potential fraud and the analysis of which deferred payments and loan repayments can be made and when – whilst ensuring other risk factors do not jeopardise business stability – is essential to futureproof the business, and accountants can assess data to provide this information in a complete and actionable format to lead smarter company decisions. This is the data insight CFOs and FDs need today.

Traditional financial risk assessment models will not be adequate. At best, problems will be revealed months after the fact. Companies need rapid identification of areas of unexpected activity today. This is where accountants and finance departments using sophisticated machine learning and artificial intelligence techniques can deliver real business value by rapidly assessing financial data and surfacing unexpected activity. Armed with this information, finance teams will know where to focus activities, the questions to ask and the remedial action to take. This information will drive departments and remedial action to ensure business success and growth as the nation gets back to its feet.

In short, accountants and finance professionals can provide the answers businesses need today, whilst helping managers to plan for the future effectively, despite the changes in policies and protocols as the pandemic continues to throw curveballs. An audit can quickly identify problems including but not limited to, cash flow, fraud, misuse of grants, loan repayment issues – all whilst offering the guidance and steps to safeguard the business to promote resilience and protect the solvency and reputation.

Continue Reading

Finance

Taking advantage of the UK’s renovation revolution

Published

on

Taking advantage of the UK’s renovation revolution 4

By Paresh Raja, CEO, Market Financial Solutions

UK property is a popular asset class because of its historical resilience to withstand periods of political and economic volatility and quickly recover its value. Domestic and international investors are aware of this general observation, which no doubt explains why investment into bricks and mortar has been rising during the COVID-19 pandemic.

As a result of tax reliefs introduced by the government to encourage buyers and sellers to return to the property market, house prices have been rising at an impressive rate. According to the UK’s biggest building society – Nationwide – house prices rose in September at the fastest annual rate since the aftermath of the EU referendum vote in 2016. Nationwide recorded annual house price growth of 5% in September.

For homeowners, this is important – house prices are a useful way of measuring the capital growth of a property. If house prices are rising, it means there is strong demand for real estate which is positive news for homeowners. House price growth also allows us to assess the overall health of the property market.

Here at Market Financial Solutions, we are regularly arranging bridging loans to support the property investment intentions of UK and non-resident buyers. From our perspective, COVID-19 has not dampened the overall need for finance to complete on real estate transactions. And importantly, we are also seeing a rise in homeowners undertaking renovation and refurbishment projects amidst the pandemic.

In August, the Renovation Nation Report revealed that the typical UK homeowner had spent over £4,000 on renovation works since the introduction of lockdown measures in March 2020, ranging from garden to living room, bedroom and kitchen upgrades. This has no doubt increased in value since then.

The rise in home improvement projects is important for a number of reasons. First, it is an effective way of increasing the value of a property. Simply updating worn furnishing and fittings, adding an extension or implementing new technologies to make a home more energy efficient can significantly enhance the appeal of a home and increase its market value.

Second, the rise in renovations and refurbishments taking place drives productivity and creates new building opportunities for SME construction firms. For example, a survey that was recently published by the Federation of Master Builders showed a marked increased interest for home improvement projects. It revealed that 42% of SMEs are predicting higher workloads during the Autumn months.

Paresh Raja

Paresh Raja

In my opinion, the COVID-19 pandemic is directly responsible for this sudden hike. People are spending more time at home, either working remotely or as part of social distancing measures. Naturally, this has compelled homeowners to consider ways of upgrading their property so that they can better enjoy their office and/or living spaces. What’s more, with the UK on the brink of second lockdown, there is a general acceptance that working from home either fulltime or part-time is something that will remain the case long after the coronavirus outbreak has been contained.

Unlocking the renovation revolution

One of the biggest challenges when undertaking a home improvement project is having the necessary finance in place. The traditional method of engaging with a high street lender for a loan has become complicated. As a consequence of COVID-19, banks are treading carefully – based on reports we’ve been hearing, loans are taking longer to be approved and the range of products available is limited.

Given how important property market activity is in driving economic productivity and growth, there is a clear need to ensure that homebuyers can access finance with minimal delay and fuss. Having witnessed current trends, Market Financial Solutions has responded by offering specialist finance loans that are tailored specifically for renovation and refurbishment projects. These are structured to the specific demands of each application, which means that construction deadlines can be met without the risk of finance being delayed.

Interestingly, the government is also keen to promote home improvements, particularly when it comes to green housing. For instance, in September the government launched the Green Homes Grant to encourage energy efficient housing. Under this scheme, grants can be accessed to pay for green home improvements. This could range from the insulation of walls and floors to the installation of double and triple glazing and the addition of low-carbon heating.

I would not be surprised if the government also considers similar grant programmes to support either types of renovation projects, particularly if more people are facing the prospect of permanent remote working. Of course, a lot of research would need to be undertaken for such a proposal but there are plenty of advantages that could be on offer as part of such a scheme. For now, we will need to wait and see.

My advice for anyone considering a home improvement project is to consider all the finance options available and applying for a loan that best meets their individual circumstances. While this might seem challenging, the fact of the matter is that lenders like Market Financial Solutions are responding to demand and creating products to support such undertakings. Finding the right type of finance will only increase the chances of work being completed on time, which ultimately works in favour of the homeowner.

Continue Reading
Editorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.

Call For Entries

Global Banking and Finance Review Awards Nominations 2020
2020 Global Banking & Finance Awards now open. Click Here

Latest Articles

One third of money management tools face closure by the end of the year if they do not embrace open banking 5 One third of money management tools face closure by the end of the year if they do not embrace open banking 6
Finance4 mins ago

One third of money management tools face closure by the end of the year if they do not embrace open banking

New research from Yolt Technology Services shows 35% of Personal Finance Managers aren’t using any open banking technology Imminent screen...

Pivoting growth strategy to rebuild consumer trust and confidence 7 Pivoting growth strategy to rebuild consumer trust and confidence 8
Business41 mins ago

Pivoting growth strategy to rebuild consumer trust and confidence

By Richard Steggall, the CEO of Urban FT Trust is essential to all relationships, whether personal or professional. And in...

Everything you need to know about APIs for business 9 Everything you need to know about APIs for business 10
Technology46 mins ago

Everything you need to know about APIs for business

By Omar Javaid, president, Vonage API Platform, Vonage  If your work brings you into close proximity with technology, chances are...

Accountants have become critical to the survival of businesses and their reputations during Covid-19 11 Accountants have become critical to the survival of businesses and their reputations during Covid-19 12
Finance58 mins ago

Accountants have become critical to the survival of businesses and their reputations during Covid-19

The opportunity for fraudulent activity to flourish as finance departments operate remotely with less oversight in these extraordinary Covid-19 times...

Unexplained Wealth Orders: Rightly Celebrated or Over-Rated? 13 Unexplained Wealth Orders: Rightly Celebrated or Over-Rated? 14
Technology1 hour ago

Unexplained Wealth Orders: Rightly Celebrated or Over-Rated?

By Nicola Sharp of financial crime specialists Rahman Ravelli considers the attention given to unexplained wealth orders – and emphasises...

Taking advantage of the UK’s renovation revolution 15 Taking advantage of the UK’s renovation revolution 16
Finance1 hour ago

Taking advantage of the UK’s renovation revolution

By Paresh Raja, CEO, Market Financial Solutions UK property is a popular asset class because of its historical resilience to...

What is a glocal supply chain? 17 What is a glocal supply chain? 18
Business2 hours ago

What is a glocal supply chain?

Thanks to rapid advances in communication and information technology, manufacturers are now able to operate at a truly global level,...

Rise in Digital Banking Activities: Should UK Banks Be Wary Of Cyber Attacks? 19 Rise in Digital Banking Activities: Should UK Banks Be Wary Of Cyber Attacks? 20
Business2 hours ago

Rise in Digital Banking Activities: Should UK Banks Be Wary Of Cyber Attacks?

By Kunal Sawhney, CEO, Kalkine. Cybersecurity in the age of digital banking and technology has had a significant impact. With...

Grey skies ahead – Malta prepares for a gloomy 2021 if they can’t tackle financial crime 21 Grey skies ahead – Malta prepares for a gloomy 2021 if they can’t tackle financial crime 22
Top Stories3 hours ago

Grey skies ahead – Malta prepares for a gloomy 2021 if they can’t tackle financial crime

By Dhanum Nursigadoo, ComplyAdvantage With the summer drawing to a close, many countries who rely significantly on warm weather tourism...

Why Virtual Businesses Might Prove More Profitable in The Future 23 Why Virtual Businesses Might Prove More Profitable in The Future 24
Business3 hours ago

Why Virtual Businesses Might Prove More Profitable in The Future

By Jolyon Hennings, founder of Box Bear – an interactive media company which recently created two new VR products (VR...

Newsletters with Secrets & Analysis. Subscribe Now