Recent independent research of UK employees commissioned by expenses management software company Expend has highlighted that Generation Z and Generation Y employees are the most negatively impacted by facilitating their employers’ expenses. Over a quarter (27%) of Generation Z employees (18-24 year olds) have not been able to pay off credit card bills because they have outstanding company expenses due to them from their employer.

This appears to be making younger employees the least tolerant of existing processes for expenses - 82% of UK Generation Z employees find being out of pocket from expenses very unfair and 42% would move jobs because of a poor expense policy.

The average amount of debt for a University leaver is now £50,000, and yet the average starting salary for most graduates is £19,000 - 22,000. According to the ONS, wage growth slipped to 2.7% from 2.8% in the three months to May 2018. However, despite the slowdown in wage growth and increased cost of living, young employees are still expected to float expenses for the business. These factors combined mean that younger workers are more financially sensitive than ever before, and yet are still expected to pay their employer’s expenses and go out of pocket each month, which can have a significant impact on their personal finances.

Expend’s independent research, which was commissioned in conjunction with OnePoll, showed the scale of this impact on employees’ finances and willingness to circumvent expense policies. Out of all age groups, Generation Z workers are most likely to circumvent the expenses policies of their employer, with over a quarter (27%) stating they would spend more than they normally would to make a company expense worthwhile, if they could get away with it. Nearly 1 in 5 (18%) of Generation Z employees stated they would profit from business expenses if they could get away with it.

The picture for Generation Y/Millennials (25-34 year olds) isn’t much better. Research from independent think tank The Resolution Foundation has shown that UK millennials are now some of the worst off financially in the developed world, only behind Greece. The home ownership rate in their late 20s, at 33%, is half that for the baby boomers at the same age (60%). Our research showed this age group would be the least inclined out of all respondents to take a job if it had a poor expense policy, with 40.87% saying they wouldn’t.

On the other hand, the older age groups are disproportionately tolerant of the existing system of expense, with the 55+ age group is the least likely to circumvent expenses because of a poor expense policy, and only 4.90% saying they would expense items they shouldn’t if they could get away with it.

Johnny Vowles, CEO of Expend said, “younger employees have a hard deal at the moment with rising living costs, wage growth described as ‘anaemic’ by the ONS and higher than ever student debt. While the current expenses system is just the way things have always been done, for some employees this could be the straw that broke the camel’s back. Organisations need to look at how all processes are impacting on their younger workforce, to encourage recruitment of happy workers but also to minimise the business risk. Disenfranchised younger workers more open to circumvent expense policies and profit from them than even before, so employers also need to gain greater oversight over their company finances to protect themselves.”

(Source: Expend)

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.

New research commissioned by Oddsmonkey reveals that Brits are using side hustles to help cover the cost of living.

As the annual inflation rate doubled from 1.2% to 3.1% in the past year, the average monthly wage of £1538.97 is not enough to cover the cost of living for almost a quarter of Brits (24%).

Because of this, 25% of working employees have resorted to a side hustle to earn extra money with 36% of those having 3 or more ways of making extra cash.

The study also found that while some Brits take up side hustles to help with living costs, many take them up to fulfil their passions with over a third (34%) finding their sources of additional income more fulfilling than their full-time job, and almost four in ten (39%) of Brits admitting that they wish their side hustle could be their main job.

Brits earn nearly £3000 a year renting out a spare room or blogging for extra cash

The matched betting experts polled 2,000 Brits on their additional sources of income, to discover the side hustles Brits are taking up to become more financially secure.

The study discovered the majority of Brits are concerned with being unable to cover the cost of their bills (48%) and their rent/mortgage (28%), and therefore adopt a side hustle to earn extra cash.

68% of Brits sell their unwanted items on eBay and Facebook marketplace this side to earn an average of £165 a month, making it the most popular side hustle adopted by Brits.

Despite not being the most profitable side hustles, making crafts and baking were found to be the most enjoyable – showing that while Brits want to earn more money, they want their additional sources of income to be something they enjoy doing.

Selling beauty products through direct selling companies such as Avon was found to be the most lucrative side hustle, with the third of Brits taking this up, earning an average of £249 commission a month.  Renting out a spare bedroom and blogging were also found to be lucrative side hustles with Brits raking in an average of £241 and £231 per month respectively.

More than 1 in 3 Brits with a side hustle don’t declare their extra earnings

Those with a side hustle are earning nearly £3,000 a year on top of their yearly salary and many admitted to dodging tax.

Despite earning over the £1,000 annual allowance, 34% of those with a side hustle confessed to not declaring their extra earnings.

The research also revealed that it’s not only those in full-time employment who have side hustles, students are also taking advantage of side hustle to cover the increasing cost of living in the UK.

Earning on average £895 a month and not receiving any help from their parents (47%), 1 in 3 students have taken up a side hustle to earn extra cash and are interestingly making more money than the average Brit.

Younger Brits earn £78 more a month than the average Brits from making and selling crafts (£241), £69 more for blogging (£300), and £17 more a month for baking (£200).

Peter Watton, spokesman for Oddsmonkey comments on the research: “With the constantly increasing cost of living, we were hardly surprised that Brits are having to take up side hustles in order to earn themselves some extra cash. While it is great that Brits are using their passions to earn extra income, it is important to remember to declare any income over £1000 to ensure you don’t get in trouble with the tax man!”

(Source: Oddsmonkey)

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.