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To Weather COVID-19 Disruption, Hone Cash Visibility and Management

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To Weather COVID-19 Disruption, Hone Cash Visibility and Management

By Michele Marvin, VP, GTreasury

COVID-19 and the resulting market volatility has ushered in a thick fog of uncertainty for corporate treasurers. Weekly surveys of corporates and finance professionals across 600 enterprises (as compiled by the Treasury Coalition) continue to reiterate that cashflow is far and away the number one concern. With barely any room for error right now, smart and efficient cash management actions are all the more consequential. Visibility into the future is limited at best, and corporates must make the most of the information they already control to extend their cash visibility and management capabilities.

Banks are constricting lending. Debt markets have battened down the hatches and are likely to remain that way for the duration of the pandemic. Just how long that could be is still anyone’s guess (per the survey, corporates don’t foresee a return to financial normalcy until at least February 2021). When the reliability of support from financial markets becomes a dangerous unknown, as is true right now, cash on hand is every corporation’s insurance policy for carry through challenging times. Against this fast-changing environment, corporates must cultivate a precise understanding of global cash assets, and prepare decisive responses for accessing and repositioning cash to shore up the business wherever and whenever needs arise.

More specifically, corporate treasurers must anticipate further disruptions to their company’s usual buy-sell activity and operations from both supply and demand perspectives. Cash availability projections will need to be rewritten now and again, until the financial disruption of the COVID-19 era has passed. At the same time, treasurers should have cash-based mitigation tactics notched and ready to let fly if and when circumstances in specific regions or business areas threaten to turn even more dire.

Let’s look at six best practices corporates should adopt to increase cash visibility and prepare a broad arsenal of effective cash management tactics:

Add a complete visualization of your cash position to your morning tasks.

Now more than ever, treasurers need to be able to pinpoint the location of almost all corporate cash around the world at any given time. But maintaining a high level of visibility into cash assets becomes more complicated in relation to the number of countries a business operates in. COVID-19 and the resulting volatility in financial markets adds to the challenge of maintaining up-to-the-minute cash visibility and makes accurate cash reporting even more essential. Knowing the position of worldwide cash reserves is a foundational strategic capability, enabling rapid-response cash maneuvers when requirements from disparate regions or business sectors arise.

Treasurers should be keenly aware of the limitations that time zones and market cut-off times put on their abilities to move cash at will. To maximize cash visibility – and therefore cash agility – implement intra-day updates and similar processes that reduce the practical limitations imposed when certain markets aren’t open for business.

Create stress test models to gauge required liquidity under various scenarios.

Accurate decision-making requires accurate information. To prepare forward-thinking strategies, build stress tests that model even the worst-case scenarios. This exercise will determine whether your company’s cash on hand and on-demand facilities are enough to see you through tougher conditions that might be ahead. Based on your modeling results, you’ll know if an increase in liquid assets or facilities is prudent to build a more comfortable buffer.

Verify the accuracy of cash forecasts by testing all assumptions.

Cash forecasts must become more frequent and (as much as possible) more accurate. To accomplish this, increase AP/AR ledger visibility and the flow of information from sales and procurement teams. You will also want to identify and address any sensitivities that hamper your ability to maintain a strong cash position wherever those issues exist, and build the sensitivities into your models

Take currency exchange rate shifts into account.

When modeling any expenses or revenue sources involving foreign currencies, treasurers must account for exchange rate changes. Make sure this variable is incorporated into any and all COVID-19 cash forecast projections.

Negotiate with banks and funding providers early on.

Cash forecasts and stress test models will let corporates know how bad the worst-case scenarios really are. If risks exist, negotiate now to prepare an optimal buffer overdraft should the worst case become the reality.

Enlist outsourced support for operational tasks.

The challenges of this moment justify an all-hands-on-deck approach. Call on supplemental help from external resources across your company’s finance team or treasury solution vendors to handle your operational needs. Doing so will free treasury resources for an intensive focus on the analysis and decision-making required to safely steer the business through to the end of the financial disruption caused by the COVID-19 pandemic.

Business

Stella McCartney Transforms Financial Consolidation And Lease Accounting With Board

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Stella McCartney Transforms Financial Consolidation And Lease Accounting With Board 1

Board revamps financial analysis, consolidation and reporting for luxury lifestyle brand’s IFRS 16 compliance

Board International, the leading provider of the #1 decision-making platform, has today announced that luxury lifestyle brand Stella McCartney is working with Board to transform financial consolidation and lease accounting.

Board is enabling the luxury lifestyle brand to automate financial consolidation from multiple locations worldwide, replace manual and time-consuming consolidation activities, model the impact of different scenarios on financial performance and achieve full lease accounting compliance with ease, for IFRS 16.

Stella McCartney is a luxury lifestyle brand that was launched under the designer’s name in 2001, with collections available in more than 100 countries and 53 freestanding stores including London, New York, Los Angeles, Paris, Milan, Tokyo, Hong Kong, Shanghai and Beijing.

“The Board platform’s ability to streamline our finance consolidation activities, whilst preserving the accuracy of financial data from Stella McCartney locations across the world and ensure IFRS 16 compliance, has been vital to the management of the brand” said Sandra Federighi-Oni, Chief Financial Officer, Stella McCartney.

“Board’s expertise in automating and analysing key financial reporting to obtain new insights, by simulating what-if scenarios adds a new dimension to our strategic financial planning,” said Federighi-Oni. “We can plan for future progress and model multiple scenarios to inform our decision-making, with a fully holistic view of our latest financial data and metrics and ensure all accounting calculations generated are IFRS 16 compliant.”

“In today’s fast-paced, data rich and evolving business environment, modelling for effective financial scenario planning, whilst ensuring the latest compliance is critical to compete,” said Gavin Fallon, Managing Director for UK, Nordics & South Africa at Board International.

“Board transforms financial decision-making, saving time through the automation of repetitive activities, creating full visibility of vital data, to enable the big decisions global

luxury brands like Stella McCartney make daily to thrive in today’s economy” continued Fallon.

Financial closing, financial consolidation, and other accounting activities require high levels of manual, repetitive work and the collation of data from a multitude of spreadsheets and data sources. These activities must also meet strict requirements in terms of compliance to corporate internal control systems.

IFRS 16 specifies how an IFRS reporter must recognise, measure, present and disclose leases.  Introduced in January 2019, this new standard will affect most companies reporting under IFRS and will have a major impact on the financial statements of lessees of property and high-value equipment. Under IFRS 16, if a company has control over, or right to use, an asset they are renting, it is classified as a lease for accounting purposes and, under the new rules, must be recognised on the company’s balance sheet.

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Can your company data make you famous?

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Can your company data make you famous? 2

By Kerry Gould, Associate Director, Speed Communications

Businesses gather and generate reams of data every day on everything from purchasing habits to customer behaviour. But too often, it gets ignored or restricted to ‘internal use’. Is this a big opportunity missed?

Perhaps more than in any other sector, finance and banking companies hold a goldmine of data. Of course, individual customer transactions are highly sensitive and need to be kept secure. But when these are collated into trends across an entire customer base, it can paint a compelling picture of people’s changing priorities. What are people spending money on? How are they using credit cards differently? Are they shifting their savings goals or looking at mortgages differently? And it’s not just consumer-facing businesses that can use their data to tell stories. It’s a growing area in the world of B2B marketing, especially for firms targeting the UK’s 5 million+ SMEs.

Insight in the COVID-19 era

Appetite to share data is increasing since the start of the COVID-19 pandemic, too. We’re already seeing companies step up and share this intelligence; barely a day goes by when there’s not a report on how people are changing and adapting. In an era when everyone is trying to be a ‘thought leader’, having this unique insight can really set a company apart and elevate its public profile.

There are some great examples out there. Barclaycard revealed in its SME Barometer that the number of small businesses actively taking payments has increased by 24 per cent since the start of lockdown, an indicator of recovery. Meanwhile, Bottomline revealed in its Business Payments Barometer that 89% of firms continued to pay its suppliers late and £164,000 was lost by the average mid-sized business to payment fraud.

These reports achieved media coverage in print and online, and likely to have been shared widely over social networks, been promoted in email newsletters, discussed in online webinars and provided talking points in customer meetings. In today’s multi-channel world, there are a plethora of ways to reach customers (and potential customers) and we know that a ‘layered approach’ to these communications stand the best chance of getting you noticed and remembered.

Commissioning a survey through an independent research agency is a tried and tested method for marketing and PR teams to gather insight to use for content marketing and news generation. But often, your company’s own proprietary data can be even more compelling. It’s based on actual facts and behaviours, immune from the public’s continually fluctuating opinions. Plus, it doesn’t cost you thousands of pounds to commission. If your company has a strong enough dataset that can tell a story or indicate a trend, it should absolutely be used.

Overcoming hurdles

Like all well-meaning initiatives, data-led PR doesn’t come without its challenges. Here, we tackle three.

  1. Getting buy in to go public
Kerry Gould

Kerry Gould

Sometimes, business stakeholders can be nervous about releasing data that may be deemed commercially sensitive, revealing market share or insight that competitors could take advantage of. In this case, it’s about considering risk versus reward. The marketing benefit for making yourself known could be offset by competitive intelligence that your rivals may have through other sources anyway. Ultimately, there’s often a compromise to be stuck and there may be some data that you can’t disclose. Bringing stakeholders on the journey with you from the start is often the best way to ascertain this.

  1. Organising reams of data

It can be overwhelming to organise complex data sets, gather trends from different silos, departments and platforms. Many finance companies have in-house data analysts and insight teams whose job this is, but for others, outsourcing to a specialist provider like Data Cubed or Beyond Analysis can be a helpful move. By building a dashboard that collates everything in one place, teams from across the business, and external PR or marketing agencies, can get access in real time.

  1. Not having enough data

It may be that your business doesn’t generate reams of data or lacks a large enough sample size of customers. In this case, you can partner with an organisation that does. In the Jobs Recovery Tracker developed with the Recruitment and Employment Confederation, we partnered with EMSI to tap into their database of live job vacancies. This helped to track the employment market amid COVID-19, generating masses of media coverage, insight to inform its content marketing and talking points for its upcoming REC 2020 conference.  This can sometimes be treated as a commercial arrangement but often considered a joint PR opportunity that’s win-win.

Data journalism is a growing discipline in the world of media, with news outlets dedicating talented people and resources to telling stories with numbers. The BBC and Guardian do it particularly well. With marketeers – particularly in data-rich industries like finance – waking up to the power it can hold for true thought leadership, the future is likely to be one ever more governed by data-led insight. How long before ‘data-PR’ becomes a discipline in its own right?

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Advice for contractors closing down their contracting company

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Advice for contractors closing down their contracting company 3

By John Bell is Director of insolvency firm Clarke Bell, which he founded in 1994.

Contractors with a limited company/Personal Service Company (PSC) have been going through more than their fair share of turbulent times recently.

In the last two years contractors/PSCs have been bracing themselves for the impact that the new off-payroll legislation (IR35) will have on their lives and livelihoods, as the Government ploughed ahead with its plans to roll out the reforms to the private sector; as it, wrongly in many cases, believed some contractors should be deemed as employees and not genuine self-employed contractors.  Then came Covid-19 and once again those self-employed workers were dealt another blow as the pandemic left many without work overnight, albeit there was some relief as Off-Payroll was paused until April 2021.   And let’s not forget Brexit and all the uncertainty around it which is having a huge effect on a lot of businesses in the UK.

It has been a bumpy ride for businesses of all sizes over the last few months and, despite the emergency measures announced by the Chancellor in an effort to keep the economy afloat, not every contractor will want to carry on trading. Some will want to retire earlier than they’d previously planned – to get away from all the turmoil and ‘cash in’ all their hard earnings. Others, however, will have seen their income falling to such an extent that they are now having cash flow problems and are unable to pay some of their bills.   Some may be considering taking up a PAYE role for job security whilst others may be forced to put their retirement plans on hold and continue working until they feel confident that their pension pot will serve them well.

The combined effects of Brexit, Covid-19 and the new Off-Payroll tax have hit businesses hard and some company directors now think that closing down their company is the best course of action for them.

A Members’ Voluntary Liquidation is the best option for contractors

If a contractor is planning on moving into an employee/PAYE role, retiring or pursuing some other life or career plan then a Members’ Voluntary Liquidation (MVL) is likely to be the most tax-efficient way to close a solvent company – particularly if the assets of a company are more than £25,000.

An MVL is an HMRC-approved process and a licensed insolvency practitioner must be appointed. While it may have a negative-sounding ring to it – with terms like ‘liquidation’ and ‘insolvency practitioner’ – there is nothing negative about it. Quite the opposite, in fact. By placing a company into an MVL it is a clear illustration that someone has been running a successful company.

An MVL allows a contractor to draw any remaining profit as a dividend, paying income tax on the dividend amount.  With the help of the licensed insolvency practitioner who will liquidate a company, the reserves can then be distributed as capital, which are then subject to capital gains tax (CGT) at either 18% or 28%.

Through an MVL, a contractor can also take advantage of Business Asset Disposal Relief, formerly known as Entrepreneurs’ Relief before 6 April 2020.  If someone qualifies for this relief, this can mean that CGT will be paid at a rate of 10% on qualifying assets, which can translate into considerable tax savings.  Each shareholder of the limited company could also benefit from a tax-free allowance of £11,000, the Annual Exempt Amount.  If there are multiple shareholders, this can be highly efficient.

To ascertain eligibility for Business Asset Disposal Relief / Entrepreneur’s Relief, contractors should speak to an accountant and also look at the Gov.uk website.

Off-Payroll (IR35), Brexit and Covid-19 are all things that are likely to have a huge impact on contractors and their limited companies and most firms of Insolvency Practitioners will offer free and confidential advice.

My advice to contractors is to talk to their accountant and help decide whether an informal strike-off or an MVL is the best option.  If a contractor is having serious cashflow problems then an insolvent liquidation might be the best option.

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