Nic Redfern, Finance Director at Know Your Money, offers Finance Monthly his advice for businesses ensure stable debt repayments.

It has been a hugely volatile year for UK businesses. The coronavirus pandemic has caused unprecedented economic turbulence, which continues to threaten many companies, as well as the job security of millions of employees.

Despite the Government putting in place substantial support packages to help businesses weather the storm, employers are still plagued with uncertainty. Indeed, 46% of businesses have seen demand for their services fall due to COVID-19, according to a recent survey of over 530 businesses conducted by KnowYourMoney.co.uk.

The research also showed that, with sales declining and cashflow issues rife, over a third (38%) of UK companies have taken on more debt in 2020. Of course, taking on debt can be beneficial to businesses – it can support growth or ensure survival – but failure to effectively plan for repayments can pose some serious problems in the future.

Unfortunately, planning for the future is hard at times like these. In fact, according to KnowYourMoney.co.uk’s study, over half (56%) of British businesses are struggling to make any long-term financial plans due to the uncertainty surrounding the pandemic. The fact a second lockdown has been announced since this survey was conducted will likely have made matters worse.

However, even amidst such disruption and uncertainty, there are steps that can be taken to help businesses get to grips with their debt repayments.

Take an inventory of the debt

Firstly, business leaders should make a note of all their debts. These will range from large repayments such as business loans and lines of credit, to smaller expenses, like business credit cards. This process will help employers understand which debts to confront first and where cuts can be (or need to be) made, thereby simplifying the repayment process.

Of course, taking on debt can be beneficial to businesses – it can support growth or ensure survival – but failure to effectively plan for repayments can pose some serious problems in the future.

In most cases, it is beneficial for businesses to prioritise repaying debts with the highest interest rates. This is because the longer it takes to pay off high-interest debts, the more a company will end up paying in the long term; tackling this debt early on will help to reduce long-term expenditure.

This exercise is particularly important for small and medium enterprise (SME) businesses, as they tend to face higher interest rates and shorter repayment timeframes. This is largely because UK SMEs' cash-to-debt ratio has been declining over recent years, meaning they find it harder to keep up with debt repayments. So, organising debts as early as possible will certainly help such smaller firms to avoid late payments, which could jeopardise their survival.

Choosing a debt reduction strategy 

Once the debt inventory has been completed, employers can look to develop a sustainable debt reduction strategy. The most basic form of debt reduction is the spartan approach. This involves the business limiting their spending to the bare necessities until the debt is repaid. However, this hard-line strategy might not give businesses the flexibility they require to run effectively.

Another popular option for businesses is to refinance debt. This typically means taking on a new loan in order to pay off existing debt. It can be a way of consolidating multiple debts into one manageable repayment, or to secure a lower interest rate. This is a particularly useful strategy for business owners with a good or excellent credit score. However, consolidating debt, even at a lower interest rate, can cost you more in the long term if you extend the term of your loan(s).

That said, refinancing a loan can come with complications; for example, some lenders may impose penalties on businesses who fully repay their debts earlier than agreed. Thus, employers should read the terms of existing loan agreements, before committing to this strategy.

Cutting costs  

Employers must also develop a sustainable budget and identify where savings can be made to finance repayments. This may seem like an obvious step, but some businesses may be unsure where to begin.

A good starting point would be to review which office equipment is not used as often as it could be; for example, laser printers or seldomly used office furniture. Employers could look to sell-off such expensive items. Additionally, they may consider purchasing second hand items in the future or shopping around for cheaper suppliers; it may not seem like a big step, but employers may be surprised by the savings they could make in their operational costs.

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Alternatively, businesses owners might consider moving to smaller premises where rent and utility costs would likely be cheaper. Indeed, moving to co-working spaces, or even making the move to permanent remote working could present scope to make further savings.

Of course, no two businesses are the same and certain cost-cutting measures will suit some more than others. So, employers should take their time when assessing their outgoings to understand which cuts, they can make without endangering the business.

Seek advice when needed 

These are trying times for businesses everywhere – even for some of the largest and best-prepared of corporations – and, at times, getting the organisation’s finances in order might seem like an insurmountable challenge. In many cases, therefore, I would recommend that business owners seek further advice.

Depending on the needs of the particular organisation, owners might look to business consultants, accountants, specialised credit counsellors or financial planners for some more focused assistance. These experts are able to assess all elements of an organisation and develop a tailored strategy to suit the businesses specific needs. Especially during difficult economic periods when businesses might seek to pool their resources, this can be a great source of help when navigating debt.

All in all, business owners should remember that they do not have to weather the storm alone. With sound advice and perseverance, companies should be able to lessen their financial burdens, and find a workable and personalised repayment strategy.

The COVID-19 pandemic, which is still ongoing, will no doubt have a profound impact on the world's economy for several months at minimum. Additionally, 2020 is an election year in the US, an event whose outcome could also have a powerful effect on a whole host of financial situations, like the unemployment rate, inflation, gross domestic growth, and more. How can you take all these factors into account to create a realistic, accurate personal budget? For starters, it makes sense to build as detailed a budget as possible, make saving a habit, file tax returns as soon as possible, and take defensive investment positions to protect against what will likely be a volatile year for the stock market. Here are four realistic ways to get your financial life in order before 2021 arrives.

Set a Savings Percentage, Not an Amount

Consider selecting a one-digit number as your regular savings percentage each payday. Too many people focus on amounts, which can be misleading and lock you into an outsize amount when your paycheck size varies. Instead, decide to put aside 5%, for example, out of each cheque you receive and you'll be better able to stick with the plan for the long run.

Get Your Budget in Order

Know what lies ahead, especially if you plan to make any changes to your monthly expenses like purchasing a home, renting an apartment, buying a car, or taking out a student loan. The point of budgeting is not always to minimise expenses; it's simply to identify where money comes from and where it goes. After doing that, and only after doing it, will you be able to manipulate various elements of the income and outflow.

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Step one is to know what you have and what you spend each month. For example, an excellent way to plan for education borrowing is to use a student loan repayment calculator for estimating monthly payments. That way, there's no guesswork about what your obligation will be, and you'll be fully able to place the item student loan payment onto its proper line in the budget. Go through each of the ways you spend money and make sure there's an entry for each one. Many people fail at budgeting not because they spend too much but simply because they don't know how much they spend and lose track of their overall finances.

Get Your Tax Refund as Quickly as Possible

If you have money coming to you after you file your tax return, send the forms in via an e-file program as early as possible. That way, you could have the cash by February. If you plan to owe money to the government, wait until the official filing deadline, or a few days before, to file and pay.

Use Metals to Hedge for a Volatile Year

For numerous reasons, 2021 could be a roller-coaster year for the stock market. That's a good reason to purchase silver and gold as a hedge against market uncertainty and potential inflation. Be careful not to put your entire portfolio into metals, but only about 10%.

The coronavirus outbreak has waylaid the best-made plans for the finances of many people, so successfully managing your money through 2020 is now looking to be much trickier than it was before. However, many of the same principles still apply. 

Whether it's saving for a rainy day or creating a budget to help you take control of where your money is going, managing your finances will help you stay on top of your bills and create a financial cushion for your future. You can start taking steps to become more financially literate at any time, so this guide will provide you with some tips on how to manage your money effectively in 2020.

Learn how to budget

Whether you choose to write out your budget with a pen and paper or you prefer to go digital and use a spreadsheet or an app, having a budget in place each month is vital to managing your money efficiently. Budgeting is a great way of seeing clearly what you have coming in and going out, so you can see if you’re overspending in a certain area and redirect that money to savings or debt payments. 

Pay off your debts

Many people have additional payments to make each month in the form of loans or cards, so you should make 2020 the year that you tackle your debts. It makes sense to pay off the debts which charge the highest rate of interest first, and then pay off the rest afterwards. Some examples of debts you should look to pay off include credit cards, store cards which typically have a very high rate of interest, and personal loans. 

It makes sense to pay off the debts which charge the highest rate of interest first, and then pay off the rest afterwards.

A good tip if you have a few debts is to list out all of the loans or cards you have, along with the minimum payments you need to make as per the terms of your agreement, and the interest rate. You can then categorise these from highest to lowest, so you have a clear view of what needs to be paid. 

Monitor your credit rating

If you haven’t been checking your credit score on a regular basis, this is the year to start that habit. You can use online tools to get a free credit report that will show you any errors or potential fraud that you may be victim too, as well as give you a good overview of your finances. It’s important to have a good credit rating for larger future purchases such as a mortgage on a property, so it pays to check in every so often and see how you’re performing. 

Consider your retirement

So many of us push the idea of saving for retirement to the bottom of our priority list because if feels like such a distant problem. But you can never start saving too early and having a plan in place from an early age will provide you with greater security when the time comes to leave your career. 

Pension specialists Reeves Financial point out that "no matter how old you are it is never too late to think about financially planning for your retirement and paying into a pension scheme. It is actually a tax-efficient way of saving money”. So, if you’re currently without a pension plan, now is the time to do your research and set one up so you can begin preparing for the future.

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Set up a savings goal

Some people can find it difficult to get motivated by savings, and it’s understandable – there are often things we want or need to spend our money on more immediately. But it’s often easier if you set a goal so you know what you’re working towards. The first step with any savings plan is to have emergency savings in place – money set aside should something happen out of the blue, such as your car breaking down or if your boiler breaks. 

Aim to have two to three months’ worth of expenses set aside in an easy-to-access account for these moments. After you have that saved, you can think about longer-term goals you may have, such as taking a holiday, planning for extra money to have on hand when you have a child or for a wedding. You’ll be surprised how quickly your money piles up, even if you just save £50 a month towards your goals. 

Final thoughts

It can be all too easy to bury your head in the sand when it comes to money, particularly if you’re worried about your finances. But having control over your money and how you manage it is the best solution to help you tackle your worries head-on and plan for the future. With these tips, you’ll be in a great position by the end of the year to feel more financially secure and able to start building your nest egg.

Many people have found that their personal finances are in a less healthy place as a result of the COVID-19 pandemic. So, it is natural to want to find a way to get your money back on track. Here we take a look at ways that you can stabilise your personal finances beyond COVID-19. 

Don’t panic!

It can be natural to see the impact that COVID-19 has had on the economy – and, more specifically on your personal finances – and think that the right thing to do is to make drastic changes. Whether that means moving your investments or looking to sell property straight away, these sorts of changes can be tempting. 

However, it is important to understand that many things will actually go on as normal. Once the markets are over the shock there has been the suggestion that dips in the economy will not be as bad as feared and the fall in house prices will not actually be too substantial – around 3% according to Knight Frank. 

Consider equity release

Of course, it may be the case that, like many people, a large part of your finances is tied up in your property. This can be a very frustrating situation if you have a house that is worth a significant amount of money, but that you cannot access without selling it. Thankfully it is actually possible to get access to this money through equity release.

Equity release can be “a sensible and practical solution for financing your lifestyle, home improvements, education or general income”. It involves essentially taking out an amount of money from the value of a property, which is then paid back when you die. 

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Make savings where you can

COVID-19 has left a world completely changed in its wake. For many people, this has caused a great deal of financial strain and challenges. However, it is important to note that there are also savings to be made that have arisen out of the situation.

For example, it may be the case that you are now able to work from home more often or perhaps that you no longer need to travel to work at all. If this is the case you may be able to actually save a significant amount of money. And there may be many different examples of this, where new circumstances have created a life that is cheaper for you.

Take advantage of government schemes

It is important to stay up to date with which government schemes are in operation. The UK government is well aware that this is an unprecedented crisis and that businesses and individuals need support in a way that would have been unheard of in the pre-COVID world. This will certainly be an evolving issue, and you will need to keep ahead of the game.

Of course, remember that the first port of call could be the government’s standard Universal Credit income support, which is always available. For anything else, it is wise to follow the government’s website. 

Do not ignore payments

It is important to recognise that COVID-19 is not simply an opportunity to ignore your financial obligations. Whilst facing difficult financial circumstances is not something anyone wants to experience, it cannot be an option for you to ignore them and hope that they go away – they will not.

Do not delay making payments in the belief that you will have much more money in the future. If you do, then you can enjoy the benefit then, but for now, it is necessary to make the hard choices and keep up to date. This can help you avoid getting into further debt, incurring fines or damaging your credit rating. 

Do not delay making payments in the belief that you will have much more money in the future.

Re-evaluate your budget

So, the solution, in this case, has to come from somewhere else – and this may have to involve re-examining your budget. As we have discussed above, COVID-19 has actually changed a great deal about the ways that we live and work, and it may be the case that you no longer need some of the more expensive aspects of your lifestyle.

Perhaps you and your partner have a car each, but it’s actually now extremely rare that you use both at the same time. This will vary from person to person, but it may be the case that you can save a significant amount of money simply by assessing exactly what you need to be spending money on.

Benjamin Franklin said it best: "If you fail to plan, you are planning to fail.” We all need goals and objectives. Some of these should be ambitious and fanciful. We all have our dream house or dream vacation — even if we know it may never truly come to pass.

But you need some real-world goals grounded in reality. Ultimately, these practical items are what should be populating your “bucket list.” Sure, always keep a few unlikely-to-achieve items in your back pocket. But you want to really focus on the ones that you know you can — and will — tick off.

And don’t procrastinate! Your bucket list is hopefully long and full of great experiences. There’s no time to waste letting them just sit there.

Yes, achieving some things will be more difficult for many people this year for a variety of reasons. But don’t use excuses and instead focus on the other goals that you still can attack. And if you need a little inspiration, set your sights on checking off the following three 2020 bucket list items.

1. Explore Professional Development

For every person, in every line of work, there is always some thing that you know will help you develop in your career. Maybe it’s learning a new skill, like becoming a spreadsheet or data wizard. Maybe it’s improving your communication ability, like mastering public speaking so you can get your ideas heard. Maybe it's finding a mentor who can help you see something that you keep missing. Or maybe it is sitting down and devising a new strategy or process to improve your company that will surely knock the socks off you boss and earn you that promotion. But no matter what it is, get started today.

2. Keep Your Mind on Your Money

We all need to improve our financial literacy, strategy, or discipline in one way or another. It’s time to stop hoping and start doing. Do you keep tapping into your savings for discretionary purchases? Are you failing to put away enough for retirement? Are you throwing away too much on interest payments? Or, God forbid, do you still not have a good budgeting tool that keeps you on task? Perhaps now more than ever, you need to work to get your financial life in order, and you should look at all the financial services tools out there to help you get it done.

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3. Splurge on Something for You

While being financially disciplined is great, that actually isn’t the problem for many people. Some are too stingy and fail to hit their bucket list items out of an overabundance of caution. If that’s you, maybe now is the time to splurge a little. Do so responsibly, but recognize that there are some great prices out there on toys and luxuries that you may have been eyeing for years. Maybe today is the perfect time to buy that RV you have always wanted and do some road trip traveling to dream locations. Along with good deals, you can also find fantastic credit financing options that offer perks and cash back rewards.

Rethinking Your 2020 Bucket List Goals

Achieving your lifelong goals is never easy. That goes double in a year like this. But there are always ways to look at your bucket list from a different angle and start checking off some key boxes no matter what.

It doesn’t have to be all skydiving and flights to Paris. There are other objectives you can pursue even today. Start exploring your professional development goals, work on hitting a key financial benchmark for you, and don’t forget to find creative ways to splurge on yourself — and even travel.

The world may be more complicated than ever — but it’s still your oyster. Even when everything is turned upside down, your life can still be whatever you make it.

If there's a single challenge that's central to the successful operation of a non-profit, it's finding a way to keep the organisation on sound financial footing. Unlike conventional businesses, they're reliant on external revenue streams that are often difficult to predict, and even harder to maintain. That overall condition of financial insecurity also introduces countless other management challenges as well. A lack of funding keeps budgets tight, makes it hard to attract the most talented workers, and forces infrastructure needs to take a backseat to daily operating expenses.

That doesn't mean, however, that non-profits are doomed to struggle with bottom-line woes. Far from it. Some of the most financially successful organisations in the world are in the non-profit sector, and it's not an accident that they got to where they are. What it took for them to do it was for their managers to engage in sound non-profit financial strategies that help to contain their operating costs, secure their funding sources, and get them connected with the right sponsors. For early-stage non-profit managers, here are the first four steps to take.

Establish Strong Internal Budget Controls

The first step on the road to non-profit financial stability is for management to institute strong internal processes and controls over where, how, and when money is spent. That's necessary for a variety of reasons. The first of them is the fact that non-profits are often subject to stricter audit requirements due to the nature of the tax-exempt status they enjoy at both the state and federal level. Failure to account for where money's being spent can threaten the very existence of the organisation. At the same time, non-profits are also answerable to their board of directors and their donors regarding their financial performance, so it's critical to make sure that the accounting fundamentals are covered from day one.

Failure to account for where money's being spent can threaten the very existence of the organisation.

Build Solid Corporate Partnerships

If you were to examine the finances of almost any well-established non-profit, the one thing you'd find that they have in common is the fact that they derive a significant percentage of their finances from a variety of corporate sponsors. The reason this is so is the fact that corporate funding (when it's available) tends to provide a more predictable funding stream than relying on event-based fundraising or individual donors. Since businesses need to manage their own budgets, they plan for expenditures well in advance and that gives the non-profit beneficiary the ability to create budget forecasts that run much closer to real-world results. Since predictability roughly equals stability, that makes developing corporate sponsorships one of the most important early-stage efforts that every non-profit should undertake.

Look for Hits-Based Early Funders

The classic catch-22 that young non-profits face is that they can't qualify for major grants or government funding sources because they lack the track record to prove themselves a responsible steward of those funds. And of course, without those funds, they can't build a track record. To overcome that early obstacle, non-profits have few viable paths to take. One is to find a wealthy individual to serve as a co-founder of the organisation and to rely on them for early-stage funding. The second is to look for philanthropic organisations that support hits-based giving.

It's a philosophy championed by organisations like The Open Philanthropy Project, who focus their giving on non-profits that pursue a high-risk, high-reward approach to the problems they hope to address. That means they're willing to provide funding to non-profit startups with no track record, provided they hold the promise of making a big impact if successful in their efforts. Today, hits-based giving can form the core of a non-profit's early financial strategy, so seeking out opportunities in this area is always advisable.

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Recruit Board Members with Financial Expertise

The final thing that non-profits should do to achieve and maintain financial stability is to try to recruit as many board members as possible that have financial experience in their professional backgrounds. This is something that many non-profits neglect to do at their own peril, often because they believe recruiting like-minded and cause-committed board members are more desirable. Although recruiting board members who share a passion for the work is necessary, it's just as necessary to bring in people with the right connections and experience to see the organisation through its early challenges. Since maintaining the non-profit's finances is a primary concern, so too should finding financially capable board members be early on.

A Strong Bottom Line

Any non-profit that works to put these four steps into practice early in its operation should find itself in a good financial position in very little time. Of course, how the organisation actually uses its resources is another matter entirely. If the cause is a good one, though, finding dedicated, intelligent people to put those resources to good use shouldn't pose any significant problems. With the right foundation in place, there's no limit to how much good a non-profit can do – and they'll enjoy years of financially-sound operation while doing it.

It means having enough money to secure your financial future. The wealthy invest in the long term, and the short tumbles and turns of the market do not deter them. When you are wealthy, you do not have to worry about working because your assets will be working for you.

You can start investing now, regardless of how much you earn. Be disciplined enough with what you earn to set aside money to invest. Remember, it is not how much you make that matters, but how much you save. If you want to secure your financial future, you need to implement some concrete money management tips that will enable you to set aside money to invest in various assets like stocks, mutual funds, and real estate, among others. Everyone has the desire to grow their money and accumulate wealth. But the question is, how do you make your money grow?

Avoid consumer debt

Most people do not live within their means. They take loans to pay previous debts, and this sink them deeper into financial troubles. It is advisable to create a habit of avoiding consumer debt. Debt is a significant barrier that hinders most people from getting rich.

If you have an interest in investing, let these three things be your priority.

• Clear all your high-interest debt.
• Develop a habit of not taking debt unless it is way necessary.
• Create a budget to ensure your expenses are lower than your income.

Start investing after you have cleared all your debts. Once you have no debts, start accumulating an emergency fund that is equal to six or more months of living expenses. It will be easier for you to grow your money with no consumer debt.

When you are wealthy, you do not have to worry about working because your assets will be working for you.

Be consistent

There is nothing like over or under-investment. As humans, we tend to begin something aggressively and quit after a few months, be it learning a foreign language, working out, or investing. Unfortunately, in investment, this habit leads to loss of money directly. Avoid such practices if you wish to grow your wealth. The primary reason money grows after being consistently invested is an effect called "rupee cost averaging." It is the averaging of the short-term ups and downs of the market in an extended period. If you are a stead investor, you can enjoy reasonable returns because of rupee cost averaging.

Invest in different plans

Do not be too religious to a specific investment. Be open to various investment plans at the same time. Diversification involves investing money across diverse options like bonds, real estate, stocks, and commodities. It is an excellent way to grow your money by limiting the chances of losing it since if a specific investment does not do well, you can count on the others.

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Invest smartly

Do not get carried away by investment advertisements. Use your discretion and insight before you decide where to invest.

• Invest in things you like
• Do not put your money in investments you do not understand
• Do not invest more than you are willing to put at stake

If you would not want the stock market fluctuations affect your savings, look for a conservative kind of investment. However, if you know the lows and highs of the stock market, then you can comfortably invest in it.

Get advice from experts

If you are unsure about your financial priorities and goals, it is wise to seek professional help or consult with someone who has accumulated wealth after investing wisely. Allow a financial advisor to look into your finances and recommend the right investments that suit your preferences and needs. That can help you come up with a solid investment strategy that will grow your money.

Remember, to make your money grow, the first thing you should do is to clear all your high-interest debts and develop a habit of not taking any debt unless it is necessary. Once you learn to discipline yourself, you may start investing in stocks, mutual funds, and other assets. However, you need to be consistent in your investments, and do not put all your money into one asset. If the need arises, seek help from professional financial advisors and let them recommend the best investments for your needs.

The UK’s festival season is getting underway and although Glastonbury is absent from the scene this year, music fans still have plenty to choose from. Festivals have become big business, with ticket prices ranging from under £60 to hundreds of pounds, depending on the level of luxury. Equifax outlines ticket and travel costs for festival goers to help people know how much to budget.

According to a latest survey, the average UK festivalgoer spends £354.54. Equifax’s own research shows that it’s easy to spend hundreds on a festival, before even considering food and drink for the weekend. However, despite the cost, 82% of festival goers think it is good value for money.

For instance, hard rock and heavy metal festival Download offers a weekend arena-only ticket for £175 or £200, including three nights of camping. Meanwhile, the Isle of Wight Festival offers a weekend adult ticket for £209, whilst the student ticket is £175. However, festival goers have to factor in an extra £31 per person for the ferry. On top of the ticket, music fans need to budget for travel – coaches to various locations can range from £37 to £97, depending on the distance. Train costs are usually higher.

Alternatively, music fans can cut costs if they live near a city and choose one of the city park festivals, such as Manchester’s Parklife or TRNSMT in Glasgow. Parklife offers day tickets for £65 or a weekend pass for £109.50. TRNSMT is £59.50 for a day pass or £155 for three days.

More and more festivals are now offering luxury and VIP or experience ticket options, which really push the price up. For those who don’t like roughing it, ‘glamping’ options include more luxurious bell tents, which are already erected and include lavish furnishings, such as sheepskins and even plugs and hair straighteners. The prices range from a pre-pitched tent at £13.63 per night at Bestival, up to £481.50 per night for their bell tents and tipi experiences.

In addition, families have more choice of kid-friendly festivals. However, it’s worth considering that teens get a reduced rate, and children get in for free at some festivals, whilst others charge for kids as young as four, so it’s worth doing some research.

Lisa Hardstaff, credit information expert at Equifax, comments, “Music festivals have become a big part of the British summer, with new ones cropping up often. The prices of tickets go up every year. The cost of the entry ticket is just the start, with travel and extras such as parking or camping access all adding to the total cost.

“Once people are at a festival, they need to consider the costs of food and drink, which add a considerable amount to what they end up spending. The average main meal could cost around £10 from a festival catering venue – this can add up over three or four days. We suggest setting a budget and estimating the overall costs, including travel and daily spending on food, drink and optional extras – such as glitter face paint, clothes or souvenirs. With a bit of planning, people can look back on a festival of happy memories, rather than counting the cost weeks or even months later.”

(Source: Equifax)

Large enterprises have traditionally struggled to keep up with the pace of their more agile and disruptive SME counterparts. Nowhere is this truer than the finance department. Below Karen Clarke, Regional Vice President at Anaplan, explains the useful simplicities of the zero based budgeting method and the huge possibilities of savings for any business.

It’s incredible to think that many businesses are still chained to the same arcane budgeting process that’s been used for over 100 years. A traditional budgeting process based on extrapolating the previous year’s spend fails to provide the detailed insight needed to achieve a material change in the cost base, particularly when line item expenses are already highly-aggregated.

Companies should no longer feel tied to these dated processes. New technologies are enabling innovative finance teams to overhaul how budgets are allocated and managed, through introducing zero based budgeting (ZBB) – and the resulting savings are starting to make headlines.

Take Coco Cola, which has revealed that it has broken out of the dark ages by incorporating ZBB into its processes, targeting savings of $3 billion by 2019 in the process. Or the world’s largest cereal company Kellogg Co., zeroing in on $150-180 million savings from ZBB. In 2016, the company publicly announced savings directly from ZBB, and noted that these savings will build to a run rate of $450–$500 million by 2018. Crucially, it will enable the company to invest in its existing brands, acquire new brands and fund geographic expansion.

Despite the prospect of realising savings of a similar magnitude, many organisations still shy away from ZBB due to concerns that it is expensive, time consuming to implement, and will disrupt their business. But this is no longer true. With the advent of the cloud and connected planning tools, organisations can implement ZBB seamlessly, without disruption to the business or existing processes.

In a world where every advantage counts, adopting ZBB where everything in every budget must be justified as both relevant and cost effective – will be central to future business success. Enterprises can use the methodology to level the playing field and bring that SME agility into their enterprise armoury. Incorporating ZBB in to business processes doesn’t have to be a complicated process. With so much uncertainly in the market and with Brexit continuing to cast a shadow over business confidence, the importance of driving greater cost discipline across all sectors has never been greater.

As we’ve seen, particularly in retail in recent weeks, sales are dropping and costs are continuing to increase for buyers, creating a squeeze on businesses. In light of this, ZBB can offer an opportunity for long-term sustainability. Despite some recent profit margin improvements caused by ferocious cost cutting, these opportunities are fast running out for organisations and are ultimately short-lived. Instead, companies should focus their efforts on how they can take advantage of marketplace opportunities, which are the real keys to growth.

ZBB is a significant shift in how organisations budget, but the huge opportunities for savings which it can unlock can make vast improvements to any business. The examples already being showcased in the market demonstrate that, for big businesses, the numbers involved are significant, and the opportunity to innovate in this way can be a real market differentiator, enabling the business to allocate funds where they’re really needed.

What’s required is a clear plan for how the business can switch to a ZBB model, with buy in from the top of the organisation. As Kellogg have openly stated, top-down sponsorship is crucial to making any ZBB initiative a success. The business also needs to be equipped with the right tools to enable this form of connected decision making and planning. By looking to tools born in the cloud, organisations have the opportunity to introduce ZBB quickly and without significant cost implications, capturing substantial value in the process.

As organisations start the New Year and are fast approaching the new financial year, never has there been a better time to refresh how costs are considered and find new ways of driving significant cost savings within the business. With continued uncertainty expected in the market, it’s essential that every business equip itself with the necessary tools and processes to strengthen their armour for 2018 and beyond.

Budgeting time is here, and you’re likely going to make some safe assumptions on the budgeting based on previous years, experience and forecast. But is are these backed by actual real data? Below John Orlando, CFO at Centage Corporation, talks Finance Monthly through data integration in budgeting, looking at specific trends we can expect in 2018.

At the present moment, the economic future looks good. Unemployment is dropping, inflation is manageable and both the House and Senate passed tax bills that will slash the corporate income tax rate, giving them added cash to grow. Over the past few months I’ve talked to many CFOs who say their companies are eager to expand and they’re actively building growth assumptions into their budgets.

However, even in the best of times, there are risks to growth since at any time some world event can affect economic conditions. Performance monitoring and forecasting are part and parcel to business success in a growth economy, and to the end, 2018 will see some positive data-driven trends emerge that will make it easy for executives to keep a watch over their businesses.

The data goldmine: CFOs and financial teams will look to the robust data-generated HR, CRM and other platforms to feed their budget models

Many mid-size companies have implemented third-party HR and CRM systems, platforms that generate robust datasets. For instance, PEO providers maintain detailed records on every type of employee or contractor who works with the company, as well as their benefit requirements. Salesforce.com tracks virtually any type of sales and metric important to the company. This data, much of it market-tested, offers a level of detail it would take an army to create. By entering or importing it into a budget model, finance teams can create highly detailed and robust budgets in a remarkably short time frame.

Organizations will be more assertive with their assumptions

With robust and accurate data from internal systems populating the budget, executive teams will have access to variance reporting that is far more accurate than ever before. Moreover, this level of specificity will prompt CFOs to be more assertive in their assumptions, as well as provide the confidence management teams need to execute on their growth plans.

Greater accountability in business decisions

Marketing pioneer John Wanamaker famously said, “Half the money I spend on advertising is wasted; the trouble is I don't know which half.” He wouldn’t say that if he were alive in 2018. The combination of robust data and better performance tracking will make it easier to assess the outcomes of virtually all business decisions (including advertising campaigns). The result will be greater accountability in business initiatives as CEOs obtain the tools to compare current results to the budget, forecasts and what occurred in the past.

With greater accountability comes greater learnings and more success

Armed with a better sense of what worked and what didn’t, business leaders will have keen insight into which activities, markets or initiatives are worth repeating. I can envision companies establishing new metrics with a greater degree of specificity than was possible in the past, supported by data-driven budgets and the ability to track budget versus the actual on a constant basis.

Forecasting will be the next big innovation in budgeting

Looking at the budget software market itself, I believe the next big innovation will be easy forecasting, driven by customer demand. CEOs in particular want streamlined and simple forecasting whether it be monthly, quarterly or half year, and will pressure their providers to deliver it.

I, of course, support this demand. As anyone responsible for a budget knows, within a few months of a budget’s completion, there’s a good chance some or all of it will be out of date. Benchmarks must be reset regularly as market or economic conditions change. If a particular product suddenly begins selling better than another, the company will no doubt want to rejigger resources in order to exploit the opportunity (or retrench in the face of disappointing sales). This is particularly true when companies are embarking on ambitious growth plans.

Growth opportunities and market conditions will move CFOs away from spreadsheets to budget models

Ten years ago, 90% of mid-size companies built their budgets in spreadsheets; today from what I see, it stands at 80%. As more and more executive teams realize the inherent power of a budget, I suspect that number will go down quickly, replaced by budgeting software that allows them to monitor performance much more frequently. But don’t expect a public mudslinging between budget-software providers. Growth in our market will come from first-time customers, rather than

Budgeting is a highly necessary and mandated task for any business, with an extremely structured process in most cases. But as budgeting expands to include a broader scope within companies, how can we work towards a collaborative budget? Chris Howard, Vice President of Customer Experience, Centage, explains for Finance Monthly.

I’ve yet to speak to anyone involved in the budget modeling process who didn’t wish for an Excel feature that somehow made budget collaboration easier. And I speak to a lot of people.

The folks responsible for creating the ‘master’ budget models, often CFOs, don’t have an easy time of it. They need to gather input from numerous people within their organizations (most of whom have no background in corporate finance) and then validate the data they receive. All too often, they rely on managers to put together entire budgets based on higher level numbers, guidelines and goals they provide.

Once that’s done, they need to piece together a myriad of spreadsheets and apply complex formulas and macros to arrive at projections. This last bit typically occurs late into the night.

But here’s the thing: Excel was never meant to be a collaborative tool. It simply wasn’t designed to farm out files and to collect and manage the input of multiple users. That means even the most advanced power user can’t deliver the level of collaboration finance teams need.

Beyond input consolidation, the CFO’s I speak to say they have an urgent need for automated rigor in their budget models to ensure accuracy. It’s not uncommon for a CFO (or another budget contributor) to find that an error – such as a broken link or formula – which causes a costly displacement in the budget. The result is a lot of discomfort.

Given needs and constraints of budget modeling, what does a truly collaborative budget look like? How does it work? Based on what I’ve heard from CFOs in the mid-market, here’s what I think are the requirements of a collaborative budget model:

Bottom-Up vs. Top-Down Management

Although it’s the finance team’s responsibility to manage a budget, the budget itself belongs to every department within the organization. It’s the CMO who determines how to spend the marketing budget, and the CTO how to best manage IT investments. This means that budgets must be managed from the bottom up, rather than top down, and that buy-in is essential. But when a CFO is forced to control the budget model via a master spreadsheet, those models are, by definition, managed from the top down. This results in a disconnect between the model and the day-to-day activities of an organization. Monitoring performance vs. plan becomes impossible.

Role-Based Security

Budgets are filled with highly sensitive information, personnel data, salaries and the like. A collaborative budget should prevent the wrong users from accessing data that’s not directly related to their roles in the organization. For this reason, a collaborative budget model should have role-based security with an interface that’s customized to the user’s function. What the VP of Marketing sees should be very different from what the CFO sees. Needless to say, this is far outside the realm of Excel’s capabilities.

Financial Integrity Safeguards

In a true bottom-up collaborative budget, most of the contributors will have no background in corporate finance, and little understanding of the differences between a balance sheet, cash flow or P&L statement. How do you ensure that input from these contributors is correctly tied to the right outputs, and is fully compliant with US GAAP accounting rules?

Collaborative budgets need some kind of built-in rigor that protects the financial integrity of the outputs, allowing non-finance team members to enter data without breaking things. In other words, data entered by facilities management is automatically tied to the correct outputs without that user even realizing it.

Self-Serve Reporting

Finally, a collaborative budget must promote self-sufficiency, especially when it comes to reporting. Every CFO I speak to tells me his or her goal is to create reports once – with financial rigor firmly in place to ensure integrity – and then hand over the reins to the CEO or Board. This is the only way a CEO is free to monitor performance vs. plan, cash flow or P&L on a monthly or even a weekly basis on their own, and without the CFO’s constant involvement.

In order to turn over the reins, the entire budget needs access to the data in real-time, otherwise the CFO will be forced to update the reports manually (hardly the level of self-sufficiency they’re looking for).

Why a Truly Collaborative Budget is Worth Working Towards

A truly collaborative budget model will, by definition, require finance departments to jettison their budgeting spreadsheets – a painful exercise given that most of them have been working with Excel since their pre-college days. But the payoff will be huge.

A budget model that combines historical information with real-time data is the only way to spot trends, threats and business opportunities. And it will be “board ready,” meaning it will allow teams to respond with accuracy to the Board of Directors when they ask about ramifications of any number of business changes on the P&L, balance sheet and cash flow statement.

Put another way, it’s time to say goodbye to that monster spreadsheet your team just finished creating. Instead, implement a budget that lets you combine data from multiple sources to present a single version of the truth. You’ll get a living, evolving document that significantly improves the quality of information you deliver throughout the year.

John Orlando is the Executive Vice President and CFO of Centage Corporation - a leading provider of automated budgeting and planning software solutions. With his previous experience concentrated on Financial Planning and Analysis, John has now been with Centage for over 13 years. Here he introduces Finance Monthly to the company and the services that it offers and discusses the relationship between business decisions and technology.

Could you tell us about the Company’s ethics and priorities toward its clients?

 Centage has been providing budgeting and planning software solutions for over 15 years. We understand that the most important aspect of your job is to develop accurate and timely budgets and forecasts that help you drive the growth and profitability for your company. Everything we do at Centage, from a client perspective; product technology, functionality; through to training, services and support, is dedicated to making the client experience unique. That is our number one priority.

Tell us more about the Budgeting and Forecasting services that Centage offers.

Budget Maestro by Centage is an easy-to-use, scalable, cloud-based budgeting and forecasting solution that eliminates the time-consuming and error-prone activities associated with using spreadsheets. It is designed for small to mid-market companies to support a comprehensive Smart Budgets approach to corporate planning. Its built-in financial and business logic allows users to quickly create and update their budgets and forecasts and never worry about formulas, functions, links or any custom programming. It is the only solution in the market that offers synchronized P&L, balance sheet and automatically generated cash flow reporting. Today, Budget Maestro serves more than 9,000 users worldwide.

How has Centage developed into the company that it is today?

 The company was created because the founders saw a need for a budgeting and forecasting solution that was more automated than what existed in the marketplace at the time. We respected the people and the processes that go into creating accurate and timely budgets and forecasts and thought there was a better way. We understood that giving financial professionals a tool that had all the financial and operational logic pre-built was crucial. This went against the traditional formula-based applications that were in existence. Additionally, Centage developed a full set of synchronized financial statements that included a Pro Forma Income Statement, Balance Sheet and Cash Flow that were automatically generated.

The CFO role in general is important to any company because it brings operational and financial discipline to the organization. I am involved with and required to be familiar with every facet of the organization from financial accounting to operations to human resources, etc. I believe these responsibilities, along with my experience in the FP&A arena building many budgets and forecasts over the course of 25+ years, has helped Centage to build the best budgeting and forecasting application that we could.

What is the role that technology plays in transforming data for better business decisions?

 Technology and business decisions are inexorably linked. All the advances in business over the past 50 years have been related to technology. It has given us the ability to take massive amounts of information from accounting systems, CRM systems and operational systems, condense them in one place and give businesses the ability to instantly review the information for trends and make informed decisions in a much shorter timeframe with little need for manual intervention.

In the case of a CRM system such as Salesforce.com, once you start to use the application it is difficult to fathom how you would have run your sales organization any other way. There are too many pieces of information to keep track of and too many data points could be missed.

Centage similarly has used technology to make our product, Budget Maestro robust and agile by eliminating all the mundane work associated with preparing budgets and forecasts. We specialize in building out all of the financial and operational finance logic so that the client, as the user, only needs to concentrate on building a set of good business assumptions. Our reporting solution, Analytics Maestro, gives our clients the ability to take the data in Budget Maestro or their resident accounting system, and manipulate and analyze the data very quickly, so that more informed business decisions can be made.

What do you anticipate for the sector in the near future?

One thing that has become clear over the past 2-3 years is that budgeting and forecasting is moving from the realm of isolated 12-month timeframes and annual budgets and forecasts, to more of a rolling budget / forecast approach that takes into account anywhere from 18- 36 month timeframes. This allows the user to plan for a much longer horizon.
Secondly, customers have been asking for budgeting and forecasting systems to reach out to other sub
ledger systems such as Salesforce, Payroll etc., to gather information, eliminating the need to manually intervene in the data gathering process.

Visit us at www.centage.com , follow us on Twitter, or visit the Centage Blog for the latest insights on budgeting and forecasting strategies.

Email: jorlando@centage.com

Phone: (508) 948-0024