All directors and owners of a company should be aware of the declaration of solvency - particularly if considering solvent liquidation. The declaration of solvency must be submitted before claiming entrepreneurs relief through members voluntary liquidation (MVL). Business Rescue Experts, licensed insolvency practitioners and specialists in MVLs, are sharing what is involved in solvent liquidation.
What is the declaration of solvency?
The declaration of solvency is prepared before solvent liquidation - providing information on the company’s finances up to five weeks before the winding up resolution - and is split into three different parts:
- Statement of assets and liabilities of the company
- The sworn declaration of solvency by directors
- The endorsement of the proposed liquidator
What is the statement of assets and liabilities?
As mentioned above, this is the first part of your declaration. This statement, in simple terms, represents the company’s financial information ahead of the solvent liquidation. It’s important that all available information is included to avoid a false statement. All assets must be listed, as well as liabilities, and it must also set out the costs of the procedure and any interest returns due to creditors. Similarly, you must outline the returns available for the shareholder once the capital distribution becomes available.
Sworn declaration of solvency
Unlike the statement of affairs - sworn by a statement of truth - the declaration of solvency must be done so by a solicitor or notary. There will be costs involved, typically around £10 per swear. The wording is also critical to the declaration and must comply with insolvency legislation.
The proposed liquidator
The proposed liquidator of the case will present the declaration of solvency to the shareholders of the company. From there, resolutions can be made for the business to enter solvent liquidation, and the liquidator will also endorse the document. This will then be made public and placed on record at Companies House.
Once the procedure begins, the assets of company will be realised to pay off the remaining creditors. The balance will then go to the shareholders by way of capital distribution. Any eligible shareholders can also claim entrepreneurs relief.
What if I provide false information?
A false declaration of solvency is a serious threat to the future of your company. It’s important to note that you cannot be suffering from the early signs of insolvency before opting for this procedure, so you must seek advice at the earliest possible opportunity. An insolvent company is one where liabilities exceed the assets, and, therefore, your business is not suitable for solvent liquidation.
If your company is found to be insolvent, your company could be placed into creditors voluntary liquidation (CVL). Similarly, an MVL could become a CVL if creditors come forward with outstanding debts that have not been paid and submit claims against your business. If this does happen, there is also a chance that you - as a director - could face criminal charges. While you could face disqualification, for a period of up to 15 years, imprisonment is also an option in the most severe cases.
Ultimately, you must always ensure your company is solvent and there are no creditors to worry about. If not, you must seek advice from insolvency practitioners immediately.
At some point, most companies will need to borrow money, whether it’s to fund the growth of the business, to manage cash flow or to purchase new equipment. There are plenty of business loan lenders in the market, but it’s important that you take your time to find the right product for your business. Below, Gary Hemming, expert at ABC Finance, outlines for Finance Monthly the basic considerations to make when looking into getting a business loan.
Finding the Right Type of Business Loan
The first step in securing funding is to take time to understand the different types of business loan products. The easiest way to do this is by speaking to an experienced business finance expert, ideally a whole of market, fee-free broker.
The different products available tend to have very different costs, both in terms of monthly repayments and the total charge for credit.
Calculate Your Budget Upfront – and Stick to it
Most lenders use computerised risk profiling systems to calculate the interest rate of each loan. This means that the rate charged can end up much higher than the lenders advertised ‘headline rate’.
As the expected costs can gradually creep up as the lender sees things that they feel increase their risk, setting a budget is key. A number of small steps up in the proposed monthly repayments can lead to you taking on a payment that is really stretching the limits of being affordable.
You can protect yourself against this by setting a maximum repayment upfront and sticking to it. Be prepared to walk away if the risk of taking out the loan outweighs the benefits.
Make Sure You Have the Documents Needed to Apply
Although each lender has their own requirements, there are some common documents that are almost always needed. These are your business bank statements and trading accounts.
Lenders will usually need 3 months business bank statements. These can either be scanned and certified by a suitable professional, or PDF copies downloaded via online banking.
2 years accounts are requested by most lenders, with PDF or scanned versions usually accepted. If your business does not have 2 years accounts, the lender will usually want as much evidence of trading performance as possible.
Management accounts will strengthen your application where accounts are either unavailable or if the latest accounts are more than 9 months old.
Be Clear on How Long You Need the Money for
There are a number of unsecured business finance products available and they all work in slightly different ways. It’s important that you’re clear upfront why you need the money and for how long.
If a cash injection is needed into the business and there is no large event upcoming that will be used to repay in full then a business loan is a strong option.
Where funds are being used to specifically fund a large one-off order, or contract, then there may be better options available, such a trade finance.
Equally, if you’re looking for a facility that can be used longer term and that will grow with your business, a business loan may prove too inflexible. In that case, revolving credit facilities and invoice finance may well be better suited to your needs.
An experienced broker will be able to advise you on some of the most suitable finance products for your needs within a few minutes of your initial chat.
Once You’re Completely Comfortable - Apply
Once you’re completely comfortable, and only then, apply for your business loan. If you apply with multiple lenders, you will be credit searched by each one on application.
Although it can seem like a smart move as you will get quotes from more than one lender, too many credit searches can actually reduce your credit score. To prevent this from happening, it’s important that you take a more measured approach.
You can do this by understanding the lender's criteria and interest rate bands – the rates charged depending on the risk presented to them – upfront.
Once you’ve found what seems like the most suitable, and likely cheapest option, apply with them first, while your credit score is at its strongest.
Is globalised trade in reverse? Is protectionism on the rise with the potential of a spreading trade war? These are questions at the top of many business leaders’ minds. The answer to both these questions is yes, and business models are going to have to change as a result. Dr Joe Zammit-Lucia, co-author of ‘Backlash: Saving Globalisation from Itself’, explains for Finance Monthly.
WTO figures already show a significant slowdown in the growth of international trade as a percentage of GDP. We are still only at the early stages, but a trade war and a stalling of globalized trade is almost inevitable.
This first part of the 21st century has seen many shifts from the post-war global world order that we had all become used to and on which the trans-national business model has been built. These changes are significant, encompassing political, cultural and economic shifts that have upended old assumptions.
To cite but a few examples, global governance structures (WTO, IMF, World Bank, etc) were previously seen as fair arbiters of the global order. Now their governance structures are seen by developing countries as dominated by the West and by the developed world as no longer serving their interests.
‘World trade produces net benefits for all’ was the 20th century mantra. Now it is clear that such benefits are very unevenly distributed with consequent economic, social and political implications. The free movement of global capital was seen as a vital fuel for growth and development. Now it is seen as potentially destabilizing, a system for hiding large amounts of illicit money, and a facilitator of tax arbitrage.
Low labour costs were seen as the competitive advantage of developing countries. Now they are seen as the basis of ‘unfair competition.’ Persistent trade imbalances were dismissed. Now we understand their corrosive effects on deficit countries.
In an information driven world, privacy and national security issues affect trade – from the manufacturing of routers to the security of data platforms, to building self-driving cars. For instance, Qi Lu of the Chinese tech company Baidu explains: “The days of building a vehicle in one place and it runs everywhere are over. Because a vehicle that can move by itself by definition it is a weapon.
But maybe most important is the major geopolitical shift. The post-war world order was characterized by Western dominance and overseen by the hegemonic power of the US. Now we have three more or less equally potent trading blocs – the US, China and its sphere of influence, and the European Union. Economists have known for decades that in such a structure, competition between blocs was much more likely than co-operation.
Trans-national business has played a role in these changes. A meaningful proportion of the US trade deficit comes not from ‘Chinese goods’ but from American goods that are being manufactured in China (the computer I am writing this on, for example). Businesses have long engaged in arbitrage between countries in investment, jobs and taxes, nurturing, over time, what has turned out to be a political time-bomb.
Neither can business leaders be blamed for such behaviour. They were doing their job: optimizing their business models. But times have changed. The rules of world trade need overhaul. And business models will have to change with them.
Some business leaders are already taking action. “The days of outsourcing are declining. Chasing the lowest labor costs is yesterday’s model” says Jeff Immelt of GE. “Now we have a strategy of localization and regionalization” states Inge Thulin of 3M.
It is also worth bearing in mind that the trade agreements that we have all become used to were developed in a world of trading largely in goods. They are poorly suited to trade in services, digital commerce and large financial flows.
It is tempting to dismiss talk of trade wars as a Trump phenomenon. Much bombast, little meaningful action, and something that will soon pass. That would be to misunderstand the slow but sure tectonic shifts – political, cultural and economic – that are happening.
How individual businesses react, or, preferably, pre-empt these shifts will determine their future performance. And they will determine whether the political consequences of their actions will, over time, smooth things out or make them worse.
Below Finance Monthly hears from Managing Director of Equiniti Credit Services, Richard Carter, who discusses the impact of digitalization on the lending market, rising interest rates and his predictions for the 2018 landscape.
Digital fluency and a thirst for convenience are making the UK’s borrowers more capricious and cost-sensitive than ever, says Richard Carter, Managing Director, Equiniti Credit Services, in this collection of predictions for 2018. Interest rate rises, and new regulations will add fuel to this fire next year, and lenders that can’t keep up will get burned.
1. Lowest price wins
In the digitised age of credit price comparison sites, brand loyalty equals bought loyalty. In 2018, lenders must earn their custom by delivering market-beating products. As interest rates continue to rise, the lenders that can drive down the cost of credit stand to prosper the most. Simply reducing margins, however, makes little business sense. But in a rising market there is a balance to be struck between protecting profit and increasing sales. Some may be willing to take a short term hit to capitalise on the rising market conditions, taking the view that volume sales justify smaller margins.
Adoption of automated and agile credit technologies will help lenders to drive down costs, reducing time-to-revenue for new products and enabling savings to be passed on to the customer in the form of more competitive rates.
2. Lenders adjust to curbing enthusiasm
The rise in interest rates are also likely to have a knock-on effect on what borrowers use credit for.
Recent research from Equiniti Credit Services[1] indicates that borrowers’ use of credit is split equally between funding aspirational items such as cars and holidays, and managing existing debt. To offset rising rates, 2018 will see lenders adjust their standard payment terms, allowing monthly repayments to remain consistent. It remains to be seen whether credit will continue to fund aspirational items at the same rate, especially since the falling pound has already driven up the cost of foreign travel and overseas goods considerably.
3. Application declines will no longer mean ‘no’
Regardless of whether lenders adjust their repayment terms, rate rises will still have an impact on affordability assessments, meaning borderline candidates will be excluded from products they once qualified for. This will trigger an increase in declined credit applications, before customer expectations have time to recalibrate.
In 2018, lenders will start to turn this to their advantage. Instead of abandoning the customer at the point of decline, they can automatically identify suitable alternatives, ideally from their own portfolio, or from other lenders. Doing so enables them to protect their relationship and ensures their customer doesn’t tarnish their credit score from repeated declined applications. Agile credit technologies hold the key to this win-win scenario, by providing a whole of market view and matching applicants to alternative loan products instantly, at the point of decline.
In a market where consumers can identify an alternative provider in a split second via a comparison site the ability of a lender to hold their attention throughout a decline and then convert them to an alternative product is a valuable coup.
4. Contact centres will need to be rethought
Equiniti’s 2014 research report revealed that 61% of consumers preferred a telephone call or face to face meeting to explore a loan application. In 2017, that figure has dropped to just 48%. We can expect this trend to continue next year, reflecting a growing desire for self-service applications. In response lenders should be rethinking their use of contact centre resources next year. As simple queries are increasingly resolved online, the role of contact centre staff will elevate to handle more complex queries, and lenders must prepare their resources accordingly. Outsourcing this function to a dedicated specialist partner is a cost effective and efficient way to manage both sporadic call volumes and complex queries, and ensures all calls are handled by skilled, FCA accredited individuals.
5. PSD2 will change everything
Driven by the advent of the Second Payment Services Directive (PSD2) in January, APIs are being opened up across the banking industry, enabling customer-permitted apps and services to access never-before-seen levels of transaction data. Lenders must embrace this new world. Here, data is the new currency, and the combination of customer-centricity and low cost is the key to attracting – and keeping - new customers. The regulation amounts to EU-sponsored digital transformation in financial services, and outsourcers will play a crucial role in helping lenders keep up, stay relevant and harness their use of new data sources to learn more about their customers and get ahead of the competition.
6. Social media data begins to play a part in credit decision making
Thanks to digitalization, the sharp decline in verbal and face-to-face communication means lenders must seek alternative ways to get a sense of who they are dealing with. Social media platforms provide a window into borrower’s lives and give lenders a data source that can be used to contribute to their assessment of an applicant. Sure, social media data will never determine whether to grant or decline a credit application, but as automation and AI technologies continue to be applied to this space in 2018, there is no reason why a lender shouldn’t include social media data in the mix.
[1] https://equiniti.com/news-and-views/eq-views/great-expectations-the-demanding-market-for-credit/
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.
Business of all shapes and sizes need to keep a strong eye on their financial situation. But this is especially true for small to medium-sized enterprises, lacking the resources of their larger brothers and sisters. Wink Bingo below lists 5 quick money-saving tips for Finance Monthly.
The essential fragility of the SME means that - unlike larger companies - should something go wrong they could find themselves in deep trouble.
To that end, it is essential that SMEs manage costs at all times, always being on the lookout for ways to save cash. Here are five ways you can do just that.
Control staff costs
If a member of staff leaves the company, ask yourself if they actually need replacing. You might find their workload can be comfortably accommodated by the remaining members of the team - perhaps those looking to take their career to the next level by getting more involved in the company.
If you definitely do need to hire a new member of staff, you could consider recruiting someone part-time or on an informal basis instead. And rather than pay a recruitment company to source candidates for you, why not do it yourself, or assign the task to a member of the team? It’ll save you money and give you greater ownership over the hiring process.
Hive off suppliers you don’t need
Paying external suppliers for goods and services is bread and butter for many companies. But it is worth reviewing your outgoings - are there any supplier services that you either don’t use, or could move in-house instead?
For example: if your senior management team uses an external travel management company to arrange travel for them, consider whether you really need to pay for this expense. Booking trains and hotels is something anyone can do - and with the internet and the number of travel-booking apps available, this is not particularly time-consuming either.
Encourage your employees to save money too
It pays to be smart with money at work. While you might be looking for ways to tighten the purse strings, is your staff doing the same? Encouraging them to help find ways in which the company can save cash, however small, is a no-brainer.
If you’re big enough, you could organise a workplace investment scheme or offer your employees suggestions on how they could save money – such as cycling to work in order to cut commuting costs.
Remember that employees have an appetite for saving. This infographic by Wink Bingo demonstrates that even if they win a fairly modest £50 playing online casino games, most people would choose to stick it in the bank rather than spend it. So, if your employees are keeping an eye on their own wallets, it’s likely that they’ll also keep an eye on yours, too.
Hire staff as and when you need them
Whatever your industry, you will know of certain areas of your company that are extremely busy at some times and extremely light at others. This could be anything from picking deliveries, to data entry, to website maintenance.
To better manage the ebb and flow of demand for these jobs and tasks, why not use freelancers when you really need lots of staff? The US and UK are freelancing hotspots, with millions of people in both countries now working independently, so there’s a vast network of professionals to tap into.
Using freelancers is a cost-effective strategy - it means you only employ people for specific jobs as and when you need them, rather than throughout the whole year.
Maintain healthy cash flow
If you have a healthy pool of cash flowing through your business then you shouldn’t have problems paying bills, staff and suppliers. But if your cash flow is shaky, it could cause problems, and end up costing you money.
To maintain a good cash flow, get a handle on your supplier management by negotiating better payment terms, carrying out regular credit checks and issuing your invoices on time. To raise cash levels, consider putting prices up or run special promotions or discounts to increase sales volumes.
Even when things are running smoothly, it is crucial that small to medium-sized enterprises ensure they always think about costs. After all, when the customers are coming through the door and everything seems fine, it can be all too easy to become complacent.
By managing your costs, shedding non-essential expenses, keeping a firm eye on cash flow and encouraging your employees to be financially responsible, you will be doing all that you can to stay financially buoyant, and in a stronger position to cope should the unexpected happen.
In light of the recent water market deregulation, Bob Millar, Water Specialist at Inprova Energy, discusses here with Finance Monthly the key opportunities to be considered for businesses, with the potential to save both time and money.
Businesses in England of whatever size can now shop around for their water and wastewater services in the same way as procuring energy. This offers the potential to get a better deal and improve service levels.
England's regional water monopolies were broken up on 1st April 2017 with the start of water market deregulation. These existing water companies remain responsible for wholesale services, i.e. the infrastructure that brings water to your site and removes waste water and drainage; but they must now compete in the open market for your retail water and wastewater business (including billing and other customer facing services).
This offers more choice for business water consumers of all sizes, whether single or multi-site. For those organisations with sites in Scotland, where the retail water market has been fully open since 2008, there's an opportunity to consolidate retail arrangements under one retailer, with potentially one monthly bill. 130,000 Scottish businesses have already had the freedom to switch supplier and some have cut their water bills by as much as 25%.
There are no changes yet in place for Wales or Northern Ireland, but some suppliers will be able to offer consolidated billing for multi-site customers across the UK, which would simplify and reduce the costs of administration.
Customers with the largest water requirements (in excess of 50,000m3 per year) may be eligible to ‘self-supply’ by applying for a retail water licence directly from their wholesaler.
Is it worth switching water supplier?
Initially, cost savings on tariffs in England will be minimal (unlike when the market opened in Scotland), but this is expected to improve after 2020 when the 2019 Ofwat price review will be implemented. Whilst some sites will gain direct procurement savings, the biggest benefits are likely to come from improved service levels and water efficiency, which can deliver considerable cost savings.
If you have the administrative challenge of looking after water arrangements at multiple sites, with responsibility for multiple water bills from multiple suppliers, then consolidation can simplify this process to one single bill from one supplier.
The savings of consolidated billing have been modelled by Policy Exchange, the independent think tank, which estimated that a customer with more than 4,000 paper bills a year from various sites would save £80,000 to £200,000 per year in administration costs by moving to electronic billing from a single supplier.
Whether you proceed with switching retailer or not, it makes sense to cleanse your existing data. This includes collating accurate details of your sites, meters and volumes for a ‘hassle-free’ tendering process. Look out for Supply Point ID’s (SPIDs) on you recent invoices – these are the reference numbers which the market will use to identify your supplies (just like an MPAN in the electricity market).
If you are using a reputable broker, they will conduct the data management for you. To start the process you will need to supply information of what water you are using and where, along with a letter of authority and at least one, but ideally 12 months' copies of bills.
While collating data, ensure that missing information is retrieved, and that any underpayments or overpayments are rectified. By validating your bills and optimising your tariffs, you will potentially reduce costs when it comes to tendering for retail services.
Reputable brokers will undertake a revenue recovery audit on your behalf to identify potential historic overcharges. Billing errors are not uncommon, so you might receive a windfall rebate or lower ongoing costs.
With accurate data and full visibility of your water consumption, you will be in the best position to go out to tender.
Water efficiency
A carefully considered water efficiency strategy can also help you to comply with current and future legislation, reduce your carbon footprint, improve environmental performance and generate positive PR.
By comparing your water consumption against other sites (either internal or external), you can gain a better understanding of your water consumption profile and whether there is scope for improving efficiency.
Poor water efficiency is costing British business more than £3.5 billion a year, so leak detection coupled with water efficiency measures can pay rich dividends.
Water saving measures might include using automatic meter reading (AMR) technology to monitor consumption; installing flow or pressure controls to regulate water flow; or harvesting rainwater for reuse, many of which require little or no investment and provide rapid payback.
Is it best to wait and see?
There's nothing to lose in exploring a water switch. Even if you remain with your existing retailer, you may gain some added value and get your billing data in order and validated. Water procurement is much simpler than energy because of a lack of price volatility. Fixed price contracts are, therefore, the norm. Since market rates are unlikely to change significantly until 2020, there's little point in hanging back for better deals to come forward. Meanwhile, it would be sensible to test the market.
Your company made the obvious move and migrated to the cloud – Amazon Web Services, Microsoft Azure, or Google Cloud Platform. Months later, the attractive glow of the move from CapEx to OpEx spend has been dimmed by the reality of increasing monthly cloud bills. As the CFO, you want to know what’s up.
This is a real challenge, according to the head of infrastructure at a mid-sized software company we spoke with recently. Let’s call him Steve.
“I need to reduce my AWS costs as quickly as possible,” Steve told us. “My CFO saw that our AWS spend started at $20k per month when we migrated last year. Now it’s over $100k per month, which makes it one of our biggest IT-related line item expenses. We’re under a direct mandate: We have to bring it down.”
The problem is clear. But how did it get so bad, so quickly?
Your infrastructure is probably exploding
“As we started to dive into it, we found that a large part of our cloud spend is wasted on idle compute services,” Steve said. “With the rapid growth in our AWS use, we didn’t have visibility and policies in place to govern and control costs. Our developers aren’t properly cleaning up after themselves, and resources aren’t being tracked, so it’s easy for them to be left running. It’s something we want to change, but it takes time and energy to do that.”
This is a familiar story for many enterprises, large and small, as they migrate to the public cloud for increased agility and to speed up product innovation. But sometimes, the other side of the “agility” coin is a lack of defined processes and controls, which leads to waste.
As Steve put it, “AWS built this awesome playground – everyone can play, but everything costs money.”
To that end, AWS is now a $14 billion dollar per year run rate business, according to GeekWire. This is partly from their rapid gain in customers – and partly due to each of their customers spending more and more each month in their massive playground. And Azure and GCP are growing triple digits year-on-year (neither Microsoft nor Google break out revenue from their cloud revenue).
Enter the problem of cloud waste – servers left running when people are not using them, such as at night and on weekends, oversized databases and servers not optimized for the applications they support, and storage volumes not being used or “lost” in the cloud. These are just a couple examples – there are many more.
Let’s break down the numbers to see how big the cloud waste problem really is. In 2016, the total IaaS market was $23B:
- 66% of public cloud IaaS spend is on compute (servers/VMs/instances in the cloud)
- Only 46% of enterprises monitor and rightsize their resources (that means 54% do nothing)
- 44% of cloud spend is used for non-production workloads (development, testing, QA, etc.) – resources that do not need to run 24×7
- Only 31% of companies monitor for unused storage volumes
So, we calculate that enterprises can save up to $6 billion by optimizing their public cloud spend. By 2020, that number grows to $17 billion.
Get Costs in Control
There’s no need to wait if you’re the CFO. Go talk to your IT and Infrastructure teams and get tools and policies in place to control your cloud costs now:
- Visibility – start by taking a look at your existing environments. If your environment is large, a single dashboard view that shows multiple accounts, regions and cloud providers can be very helpful.
- Governance – set clear guidelines around who has access to your cloud services, provision appropriately sized instances, and stop non-production instances when they are not needed.
- Automation – start taking action on these guidelines to optimize your cloud costs by leveraging single purpose SaaS tools built to optimize cloud spend.
For non-production servers, the simplest way to do this is with a scheduling tool that allows you to set automatic on/off schedules, like ParkMyCloud. It’s an immediate win: you can save 20% or more on your next cloud bill.
Talk to your Development and Operations teams today about getting cloud costs optimized and in control. It’s time.
For more information, please go to: http://www.parkmycloud.com/
Business insurance firm Hiscox recently produced a resource that might be useful for businesses pre- and post-Brexit. It is a side-by-side comparison table of the UK, France and Germany and displays how easy it is to do business in each country.
It features all the main tax rates, employment laws, costs and incentives in each of the three biggest economies. The resource is designed for those businesses in the UK considering relocating to an EU country after Brexit.
You can view the full table in a pdf here.
(Source: Hiscox)
Mike Randall, CEO of Close Brothers Asset Finance
More than half (59%) of small and medium sized businesses across the UK are experiencing increased operating costs, and of that figure, 58% say it is having a negative impact on their cash flow.
The figures come from the Close Brothers Business Barometer, a quarterly survey of UK SME owners and senior management.
Of those who are impacted by increased operating costs, almost two fifths state that rising energy bills are creating the greatest problem for them; while just over a quarter say that the cost of raw materials and stock is causing the most pressure on their cash flow.
CEO of Close Brothers Asset Finance, Mike Randall said: “Operating costs have increased significantly over the past few years, and are arguably one of the most difficult things for small business owners to manage in the current climate.”
More than a third of firms krogerfeedback surveyed say that while their direct costs have increased, they feel unable to pass any of this on to their customers.
“This is a situation that is leading to increased pressure on already-tight margins and it is entirely possible that operational costs will continue to rise for the foreseeable future,” said Mr Randall.
