Following the autumn budget announcement yetrerday, Finance Monthly has heard the initial reactions from experts at top accountancy firm Crowe UK. From Corporate Finance to Small Businesses and IR35, there are tax implications for many…

Matteo Timpani, Corporate Finance partner:

Entrepreneur’s Relief (ER) remains an attractive, and essential, tax incentive that drives UK innovation and entrepreneurship. That said, it is disappointing to see amendments made to the relief which may impact the ability of certain individuals to benefit from it in the short term. There will be a number of mergers and acquisitions (M&A) transactions currently in progress which will likely be put on hold to ensure participants are able to qualify for Entrepreneur’s Relief in due course.

This change only emphasises the importance of business owners taking specialist advice, and being prepared, long in advance of the time they are considering succession and exiting their business. We await the specific details of when this change will be implemented but anyone who is considering selling their business in the next 12 months, and is unsure if they, their management team and/or other shareholders will qualify for ER, should seek advice now and consider immediately the implications of this change.

Tom Elliott, Head of Private Clients:

It is not surprising to see The Chancellor reaffirm the government's commitment to Entrepreneurs' Relief, albeit with tighter conditions (qualifying period doubled to two years). However, it might have been more effective if the minimum shareholding requirement was abolished altogether – this would incentivise all employee shareholders and not just the C-suite.

The changes to Capital Gains Tax (CGT) reliefs for the sale of main residences look like an attempt at modernisation. Lettings relief has changed so as not to apply to the AirBnB model - relief applies only for shared occupation. The shortening of the ‘period of absence’ from 18 to nine months for Principal Private Residence relief will need to be monitored closely, as any slowdown in the housing market (where it may take more than nine months to sell) may result in an overall reversal.

Rebecca Durrant, Private Clients partner:

It was pleasing to see the personal allowance and higher rate tax brackets raised a year early, but it will be interesting to see whether the Chancellor treats this as a ceiling. Rates could now be frozen for following years, which would turn the tax cut into a hike very quickly. In the mid to long-term, this may not protect the inflationary impact that a no deal Brexit may have.

Phil Smithyes, Managing Director, Crowe Financial Planning

The move to raise the personal tax allowance to £12,500 and raise the higher rate tax threshold to £50,000 from 6 April next year is a move that should be welcomed by most pensioners, making their pension savings go that much further.

Under the pensions ‘freedom and flexibility’ rules, individuals could take up to £16,666 each tax year from their pension fund before they begin paying income tax. This is achieved through a combination of 25% tax-free cash (£4,166) and the new £12,500 personal tax allowance. Careful planning will help pensioners money go that further and minimise their liabilities to tax in retirement.

Susan Ball, Head of Employers Advisory Services:

In April 2017, the government reformed the IR35 rules for engagements in the public sector and early indications are that this has resulted in an increase in compliance within the public sector. This will now be replicated for the private sector, but a reasonable implementation period is vital so the effective date of 2020, and the fact the rules will only be extended to large and medium sized private businesses, are both sensible steps. The Chancellor clearly took on board the feedback from the consultation process over the summer. Engagers should start planning now based on the experience of the public sector in order to have an effective procedure in place for the start date of April 2020.

Laurence Field, Corporate Tax partner:

The Chancellor's statement was made against a background of political uncertainty, mixed economic signals and an increasingly protectionist agenda from many of our trading partners. Tax is one of the most politically high profile things a government can do, and this was one of the most political budgets a Chancellor has had to deliver for decades.

The UK doesn't raise enough tax to keep providing public services at the current level, especially given the aging demographic. A tax system that raises more tax will need to be more efficient, perceived to be more fair and find new 'pockets' of wealth or bad behaviour that can be taxed without political risk.

An autumn budget also has the advantage of kicking the can down the road given that the majority of changes will only kick in from April next year if not later. However, this is the first glimpse we have of the type of post Brexit fiscal landscape the government wants to create.

The announcement of a potential digital services tax (DST) makes sense. Global companies need to be seen to be paying their 'fair share'. They don't have votes, so are an easy target. Playing tough with the digital services tax is politically attractive even if this causes conflicts with other tax jurisdictions. It is unlikely such measures will find much opposition in Parliament given the ground has been well prepared. How our trading partners (and particularly the US) react will be the real challenge. Retaliatory measures will not help the British economy. Therefore by outlining a timetable to introduce measures in 2020 he has provided cover for trying to get international agreement. Talking tough, but deferring action makes other parts of the Budget more palatable.

Elsewhere, plastics have found themselves in the environmental firing line and it was an easy, and politically popular decision, to try and find ways of taxing its use. Requiring more usage of recycled plastics is a way of stimulating that industry while being seen to be tough on pollution. The challenge with all sin taxes is that if they are too effective, the source of revenue will dry up. The damage that plastics can do is all too obvious, the Chancellor is no doubt sincere in his desire to reduce our use, but would no doubt be grateful if industry doesn't take action too quickly.

A traditional industry like finance and accounting doesn’t often go through many changes. However, with the rise of artificial intelligence (AI), machine learning and automation, technology is having – and will continue to have – a huge impact on every business; changing the way people work within an organisation. And, finance departments are not exempt from this change. Below Andy Bottrill, Regional VP at BlackLine, discusses the future of finance and accounting with Finance Monthly.

Whether finance departments like it or not, technology is going to become part of the accounting process. And despite 71% of workers admitting to still using spreadsheets to manually carry out month-end tasks, 80% of businesses are expected to be ready to adopt AI by 2020.

So why should today’s accountants look forward to, and not fear, the future and technology?

Automating Admin

Companies have already reported that 75% of intercompany transactions are automated, and this is only set to increase over the next 10 years; with 45% of individuals predicting invoicing will cease to exist by 2030.

Although the prospect of investing in automation may seem negative to many accountants at face value, they need to consider the long term benefits it can bring.

Workers must realise that technology will actually positively impact them. For example, removing mundane tasks such as admin data entry – automation can do this far quicker than a human, with a much higher accuracy rate. Using this technology, accountants are seeing manual admin tasks disappear, giving them time back to do tasks of greater value, such as financial analysis.

Augmenting the Accountant

A large concern around the future of finance and accounting is that robots will result in redundancies. But many fail to realise technology won’t wipe out jobs, but instead augment existing roles.

In 10 years’ time, the accountant we know today will no longer exist and instead, an accountant with a completely new skillset will have evolved. Technology is transforming employees’ roles, allowing them to transition from accountants who report last month’s numbers to reporters and analysts who deliver real-time data and predictive analytics.

Removing mundane tasks from day-to-day activities frees up time for more rewarding tasks in the finance department and others that require help – augmenting accountancy roles. Having the opportunity to work in other departments or take on other areas of expertise augments the skillset that accountants have.

Augmenting the accountant role in this way not only boosts job prospects within the workplace, but makes employees much more employable in the future.  Making it an opportunity accountants should embrace.

Removing bad habits

Many organisations pride themselves on “best practices”, and don’t stray away from what they have always known. Sometimes, however, adhering to outdated traditional processes can do more harm than good and that is seen within the finance department.

Financial departments are known more than any to practice the phrase “if it ain’t broke, don’t fix it”. However, technology is changing this and removing these somewhat bad habits from day-to-day tasks and instead replacing them with new “best practices” through the use of technology.

Efficient Processing

Amid the personal benefits technology can bring to businesses, the practical savings are just as important – especially for C-suite level executives.

Imagine it’s the year 2028. The CEO questions the finance department on the likelihood of being able to acquire a desirable start up. In response, the CFO brings up real-time figures on her iPad and analyses them with her team to evaluate the potential options. She then emails the CEO their forecast: the business can afford to put in a competitive offer.

And while this evaluation is happening, the machine learning programme installed in the finance department has spotted and flagged a suspicious transaction that looks like possible fraud. The team are able to investigate this straight away, instead of waiting for auditors to discover it. Through this continuous accounting, businesses gain better insights and minimise mistakes.

Increased Sector Reputation

Whilst it’s important to look forward to the internal benefits technology will bring, it is equally important to understand the external impact.

When it comes to quarterly reporting, many finance departments have been scrutinised for incorrect data. But the technology available to finance departments today is helping reduce, if not eliminate, this from happening.

By using real-time data analysis, automation and machine learning businesses can reduce the number of reconciliations required and decrease the margin of error. As a result, more accurate financial results and closing data is produced.

This not only increases the reputation for individual businesses, but for the sector as a whole. Instead, accountants can promote their profession in a positive light. As businesses look to be the best in their industry, enhancing reputation is critical – and technology can certainly help do that.

No one likes to think about worst case scenarios such as death or illness, but having a rainy day plan for our money is vital for our loved ones and to give you peace of mind. Here, Jason Lowe discusses the numerous and simple steps you can take to start planning ahead and protect your future.

Chief Financial Officers (CFO) are playing a critical role in driving digital disruption across the organization, according to new research from Accenture. Today’s CFOs oversee more than just the finance function and are now integral players in directing enterprise-wide digital investments and managing their economic outcomes and impacts.

The research report, The CFO Reimagined: From Driving Value to Building the Digital Enterprise, finds that CFOs have expanded beyond their traditional finance roles into areas that have broader consequences for the whole organization. In the UK, eight in 10 CFOs see identifying and targeting areas of new value across the business as one of their main responsibilities. More than three quarters (78%) believe it is within their purview to drive business-wide operational transformation.

"CFOs are increasingly stepping out from the confines of their role to act as strategic advisors as well as innovators across the entire enterprise," said David Axson, Senior Strategy Executive Principal at Accenture. "In an era of unprecedented disruption, this repositioning of the role will continue as CFOs take the role of digital stewards, using data to drive value and improve efficiency while mapping out the digital investments required for their organisations to remain competitive."

CFO as the Digital Investment Sherpa

UK CFOs are emerging as drivers of the digital agenda, with 80 percent heading up efforts to improve performance through adoption of digital technology, and 73 percent also exploring how disruptive technologies could benefit the entire organization and the business eco-system. Not only are CFOs carrying out their own tasks faster and better through automation, they’re also increasingly ushering in the “digitalization” of other functions and finding new ways to use technology to change business models and open new revenue streams.

CFOs: Get Your Data House in Order

The standard CFO to-do list is shifting towards strategic planning, advisory and analytics roles as CFOs continue to automate routine accounting, control and compliance tasks. Automation of these finance duties is enabling the finance function to focus on newer and more challenging tasks and bring the C-suite together to act on insights gleaned from data analysis. Today, 34% of finance tasks are carried out by technology; by 2021, almost half (44%) of these duties will be taken over by automation.

“CFOs’ use of data is expanding to other parts of the business. As a result, they will need to be more entrenched in transformational technologies such as AI and analytics to usher in digitization of the broader organization, create new business models and unlock new revenue streams,” said Dr. Christian Campagna, senior managing director, Accenture Strategy, CFO & Enterprise Value. “The CFOs who step up to manage these opportunities will be the true guardians of the enterprise.”

As the role of the CFO continues to evolve, so do the skillsets required to become a finance executive. Today’s finance function must include employees with a wide range of capabilities, from data visualization to flexible thinking. Most CFOs recognize that finance skills will continue to move away from core finance to advanced digital, statistics, operational and collaborative skills (79 percent). And more than three-quarters (76%) say the change must be rapid and drastic, as traditional finance roles may soon become obsolete.

Future Finance Talent Is Calling

The biggest challenge for CFOs will be recruiting or training the talent to understand how to collect data and gain insight from data. Almost 9 in ten (87%) UK CFOs agree that data storytelling is an essential skill for today’s finance professional. They must be more open-minded and collaborative to work effectively with and serve as strategic advisors to leaders in other business functions.

“It feels like there are two camps for what people look for in a CFO: the control or accounting background versus a more strategic finance role who partners with the CEO,” explains Chris Weber, CFO and executive vice president, Halliburton Company. “Over time, I think the shift has been towards this second role, even if that means the candidate isn't an accountant by training.”

(Source: Accenture)

To hear about tax planning and the things that need to change in the UK tax legislation Finance Monthly speaks with Adele Raiment, Director of the Tax Advisory team that specialises in entrepreneurial and privately owned businesses at Mazars LLP. Adele’s main area of expertise is working with privately owned businesses to develop and implement a succession plan, to ensure that any assets that the shareholders wish to retain are extracted in a tax efficient manner and she also works with all parties to assist in the smooth running of transaction.

What are the typical challenges faced by shareholders of entrepreneurial and privately owned businesses in the UK, in relation to the management of their finance?

I think the main concern on the horizon is the potential impact of Brexit on the UK economy and business confidence more widely. For privately owned businesses in the UK, many are still very cautious following the 2008/09 recession, and with the uncertainties surrounding Brexit, it is difficult to plan too far ahead. One of the main priorities of shareholders is ensuring that they have sufficient cash reserves to ride any potential downturn in the economy whilst recognising that they need to invest and innovate to thrive.

What is your approach when helping clients with tax planning?

My approach is to primarily understand the client’s commercial and personal objectives in priority to considering any tax planning. When planning for a transaction, I frequently find that the most tax efficient option isn’t always going to meet the key objectives of the shareholders or the business. It is important to consider the shareholders and the business as one holistic client, and therefore strike the right balance between personal, commercial and tax objectives. In respect of tax specifically, it is important to take all relevant taxes in to consideration whether it be corporate or personal. A good understanding of all taxes is therefore required.

My clients vary from FDs, to engineers, to self made entrepreneurs - all requiring different approaches. I believe that it is fundamental to get to know your client and adapt your approach to ensure that they understand you and what you are trying to achieve.

What are some of the day-to-day challenges of operating within tax planning? How do you overcome them?

As I predominantly work on transactions, I often work very closely with other professionals such as corporate finance professionals, lawyers and other accountants. The key challenge to this is making sure that the whole team is working collaboratively to achieve the best result for our client.

We are also under pressure to keep costs down, whilst ensuring that we provide quality advice. This can be difficult if the team has multiple transactions on the go at the same time and senior resource is constrained or if the project is wide-ranging, requiring several specialists to input in to the advice. The key to this is having a driven and supportive team, where teamwork and openness is pivotal to success. The working environment of my team at Mazars is incredible as we encourage open discussions on a variety of areas but one of the most useful ones is on technical uncertainties, which encourages consultation in times of uncertainty and technical development.

In your opinion, how could UK tax legislation be altered for the better?

Despite an exercise to ‘simplify’ UK tax legislation over more recent time, the legislation has increased in volume. A good example of this is that there are now two separate corporation taxes acts, when previously there was one. Having said this, the majority of the language used in more recent acts has made the legislation more user-friendly. However, there are still pockets of the legislation that seem to have been rushed through parliament and the practical use of the legislation was not considered fully prior to being enacted. This has resulted in several pieces of legislation being amended a year or two down the line. Although there does seem to be an element of consultation between Practice and HMRC prior to some legislation being enacted, I’m not always convinced that HMRC take on board the feedback. I therefore feel that a more rigorous consultation process should become standard to ensure that the commercial and practical elements of legislation are considered prior to enactment.

Contact details:

T: +44 (0) 121 232 9583/ M:+44 (0) 7794 031 399

Website: www.mazars.co.uk

Email: adele.raiment@mazars.co.uk

LinkedIn: http://uk.linkedin.com/pub/adele-raiment/13/693/360

Email: adele.raiment@mazars.co.uk

LinkedIn: http://uk.linkedin.com/pub/adele-raiment/13/693/360

How does development finance work and what are the criteria? Below Gary Hemming at ABC Finance explains the ins and outs of project financing and development loans in the property sector and beyond.

1. What is development finance?

Development finance is a type of short-term, secured finance which is used to fund the conversion, development or heavy refurbishment of property or properties. Property development finance can be used for a range of different building projects but tend to be used for ‘heavier’ projects, which require serious building works.

Projects which require ‘lighter’ works, such as internal refurbishment are likely to be better suited to a bridging loan.

2. How does it work?

Development finance can be more complex than residential mortgages, with funds advanced upfront and then throughout the build.

Funds are initially advanced against the value of the site, with most lenders happy to advance up to 60-65% of the value.

Once the build has begun, further funds are released at agreed intervals, with lenders often willing to advance up to 100% of the build costs. In order to agree to each stage release payment, the site will be re-inspected by either a lender representative or monitoring surveyor. If they feel that works are being done to a high standard and there is sufficient value in the site to release the next stage, funds will generally be released quickly.

The reinspection and further staged drawdown are then repeated until the project is completed.

3. How is the interest paid?

The interest is retained by the lender as each stage is drawn down, meaning there are no monthly payments to make. When the development is complete, the loan is redeemed along with any interest that has accrued.

This generally suits both the borrower and lender as cash flow can be difficult to mage during a build. As such, the removal of monthly payments makes the loan easier to manage for all parties.

4. How much does it cost?

The rate charged will depend on several factors, with the main ones being

• The developer's experience and track record
• The scheme being undertaken
• The location of the development
• The amount of funding required
• The loan to value/loan to GDV requested

Larger loans of say £500,000 or above will usually be between 4-9% per annum depending on the above factors.

Smaller loans of say below £500,000 will usually range from 9-12% per annum however if the deal is strong you could pay around 6.5% per annum. Usually, lenders price each application individually.

In addition to the interest charged, the will usually be a number of other fees, the main ones are:

• Lender arrangement fee – this is usually 1-2% of the loan amount
• Lender exit fee – this is not always charged but can be 1-2% of the loan amount.
• Valuation & monitoring surveyor fees – these can vary and it is almost impossible to offer a guide due to the number of variables.
• Broker fees – most brokers will expect to earn 1% for arranging a property development loan. Where they are not paid by the lender, they will usually charge it as a broker fee directly to you.

5. Understanding the maximum loan available

Property development finance lenders use a number of key metrics to calculate the maximum loan, they are:

• Loan to value (LTV) – The loan to value ratio is used to calculate the maximum available advance at any one time. The monitoring surveyor will revalue the site throughout the build to ensure the lender is never overexposed.
• Loan to cost (LTC) – Most lenders will want to know that you are putting up a certain amount of the money yourself, loan to cost is used to calculate this. For example, a maximum loan to cost of 90% would mean that the lender is not willing to put more than 90% of the total cost of works into the scheme. You would, therefore, have to pay at least 10% of the total project cost by way of deposit.
• Loan to gross development value – Otherwise known as loan to GDV, is the maximum percentage of the loan that the lender is willing to offer. If a £1,000,000 scheme had a maximum loan to GDV of 70%, the maximum total facility would be £700,000.

The lender will combine all 3 of these metrics to calculate the maximum loan. Where there is a conflict between the 3 figures, the lower of the 3 will be chosen to cap the loan.

6. What happens when construction works are complete?

When the works are complete, the loan will generally need to be repaid. Often, people look to refinance to a term loan such as a mortgage or switch to a development exit product whilst the site is sold as this can be cheaper than the development finance, maximising profit.

The facility will be set up to last for only the build period, with a grace period to allow time to refinance or sell. Development finance should never be used as a long-term finance solution.

Do you want to go from being a stock market dreamer to a high earner? A new tool could be what you need to transform your hindsight into insight.

How Rich Would You Be? uses market data from the past 12 months to reveal exactly what you could have made if you invested in a variety of cryptocurrencies, commodities and companies. It also forecasts the potential gains for each over the coming months to predict the next big investment opportunity.

Via a bespoke algorithm that uses machine learning, the tool feeds historical data on all 15 options through a recurrent neural network to unveil the future rise and fall in value for each investment.

The 15 commodities monitored include:

• Bitcoin
• Ethereum
• Ripple
• Bitcoin Cash
• EOS
• Gold
• Oil
• Copper
• Wheat
• Coffee
• Apple
• Alphabet (Google)
• Microsoft
• Amazon
• Facebook

All data is displayed in concise visualisations, allowing you to compare individual or multiple investments side-by-side.

The future predictions reveal that the cryptocurrencies will experience the highest percentage increase, yielding more profit than commodities or companies.

The algorithm also reveals that the value of Ethereum will skyrocket from $289.26 per unit to $788.42 if it continues on its predicted path - an astounding 173% increase by October 28th.

Similarly, Ripple investors should look forward to the next month since the cryptocurrency is charted to rise in value by 159% - surging from $0.34 per unit to $0.88 per unit.

Alphabet Inc should perhaps be avoided as the value of the company is set to drop -10% per share. Following in Alphabet’s footsteps is Apple, which is set to fall -8% from $227.63 per share to $208.47.

Despite the unpredictability of the cryptocurrency market, the historical data shows that when compared against commodity and company investments, EOS, Bitcoin and Ripple boasted three of the top five investments.

EOS aficionados who invested in September 2017 will have noticed a 786% increase in price per unit over the last year - a jump from $0.73 per unit to $6.47.

Though it is now set to undergo a negative percentage change, Amazon experienced a 106% increase in value per share between September 2017 and September 2018.

Unfortunately for commodity investors, the two investments that have made the biggest losses over the past year include coffee and copper. Coffee has made the most significant loss over the last year, with a -20% change - dropping from $129.65 per pound to $1103.33.

Copper investors will also have been disappointed with the -12% change in value over the previous year from $3.06 per pound to $2.68.

Commodity investors who chose to invest in oil over copper would have enjoyed a 46% rise from $48.07 per barrel to $69.97 in just one year.

Values: Historical and predicted change in 15 leading investment choices

(Source: How Rich Would You Be?)

The high cost credit industry hasn’t been rocked by the reported demise of payday lender Wonga, it is just mutating, says financial expert Jasmine Birtles.

Birtles, founder of MoneyMagpie.com, says that high cost credit is alive and well in the UK thanks to continuing lax rules on lending rates and the desperation of vulnerable families, many of whom have been hard hit by austerity cuts and the introduction of Universal Credit.

“One gets a sense of schadenfreude seeing Wonga brought down partly by claims management firms - firms which also often use questionable marketing tactics to get their customers and then charge over the odds for their service,”says Birtles. “However, even if Wonga does go into administration, it doesn’t by any means herald the end of high cost credit. There are many over-priced lenders on the market, and more waiting in the wings, to take up the slack.”

Birtles is calling for a two-pronged approach to dealing with the lending crisis in the UK:

1. Put stricter caps on how much lenders can charge in interest on any loans. Even though Wonga was forced to reduce its interest rate from over 5,000%, it is still charging over 1,500% now which is an insane rate for anyone to pay
2. Make more money available as a Social Fund loan. It used to be that people in dire straits could get a quick loan, at no interest, to buy essentials for their home through the Social Fund. Hardly anyone gets one of these now. If the money were made available again it would stop quite so many people going to high cost lenders when desperate.

What it means for Wonga customers

Sadly, if Wonga does go into administration it won’t mean that current customers will have their debts wiped out. The administrators will take over the running of the business and will demand money in the same way as the company would have done before - possibly even more vigorously

What it means for the industry

It sends a warning shot across the boughs for other high cost credit companies but it won’t stop them charging over the odds for short-term loans. In fact it may even encourage other companies to ramp up their offerings to fill the gap.

Already there are companies doing well out of high cost credit:

• Companies like QuickQuid and Lending Stream offer very quick, short-term loans at very high rates. They haven’t been as much in the public eye as Wonga and, so far, have avoided the bad publicity that Wonga had in recent years.
• Rent-to-own companies like BrightHouse do a roaring trade in household goods which end up costing customers up to five times the original cost of the product.
• There has recently been a proliferation of high cost credit cards for people with poor credit, making it easier for people to spend with interest rates of between 27-35%.

(Source: MoneyMagpie.com)

Technology is transforming almost every area imaginable, but education and recruitment are surprisingly yet to be disrupted, and consider themselves to be relatively early in the adoption of technologies. These technological developments, combined with data analytics and job-specific simulations are at the forefront of driving this disruption, particularly in the financial sector. Below Finance Monthly hears from William de Lucy, CEO of Amplify, who delves into the drive behind technology development in the recruitment departments of finance teams worldwide.

Businesses are now delivering targeted training for companies throughout the fintech ecosystem, providing them with new, innovative ways to enhance the learning environment for prospects, resulting in a higher calibre pool of talent for the client.

It would appear that despite a certain level of volatility existing in the financial sector, leading financial institutions are still chomping at the bit to secure the best candidates, demonstrating the overall buoyancy of the market. Much like certain aspects of the financial ecosystem that is witnessing a transformational shift away from manual, human-oriented tasks, the level of automation and simulation in financial recruitment can reap huge rewards for leading institutions.

Evolution of technology and data allowing real world simulation

Technology and data expectations have never been higher, due to the major advancements in technology that have driven this change. Not only has technology significantly increased the amount of data being generated, but it has also provided affordable and efficient ways to collect and store this data so that organisations can leverage data-driven strategies to innovate, compete, and obtain value from information. With technology upending workflow and processes, tasks that were once handled with paper money, bulky computers and human interaction are now being completed entirely on digital interfaces.

Data analytics have come a long way in recent years. From e-commerce businesses tracking who visits their websites and what pages they visit, technology has moved to the collection of huge amounts of data about consumers and their behaviours. This has led to a huge paradigm shift from focus on products, to focus on consumers and what they want and value. Financial services institutions that use big data to drive their decisions will win the competitive race in the long run.

Education with the implementation of technology

Technology has previously been seen as a disruptive influence in the classroom, however this perception is slowly changing. With apps that change how we shop, eat and communicate, technology is moving at a fast pace, and society is having to adapt alongside it. Education with the help of technology has opened up a world of opportunities for students. From collaboration through the use of emails to easy sharing of information - technology is and will continue to alter the education sector into the future.

Students are now looking at the value they receive for their investment. They want to know how this experience will help to secure a place in their chosen careers, rather than the academic ambitions that their professor may have harboured when they were a student. Technologies can give students the same on-the-job training experiences delivered to clients, which enables them to directly connect with such institutions when they perform.

The simulations of real-life work roles give students a broad experience across the entire industry, from any area including investment bank market-making and sales-trading to portfolio and risk management. The objectives are for students to learn through ‘doing’, allowing them to enhance their academic skills and to better prepare them for their future workplace and their best suited role.

Technology and recruitment within the finance and education sectors

A recent LinkedIn study of 12 global investment banks has found that analysts and associates who left their positions in 2015 had stayed in their roles for an average of 17 months. This compares to a 26 month average in 2005. Furthermore, the study also revealed that some banks are incurring significant costs that are associated with replacing employees who leave.

Bridging the gap between what students are taught in theory, to what happens on a day-to-day basis in an office environment, proved difficult before the implementation of certain technologies. Technology has enabled the disruption of traditional recruitment paths of many major financial institutions which often recruit from only a select few universities and use rigid, automated processes. Along with this, companies are now able to broaden their search and identify talent that may not have been uncovered previously. A candidate could have a distinct ability to perform a specific function outside of their pure academic achievements, which allows for a more diverse workforce and greater overall performance and output.

Technology these days, can give businesses the ability to measure so many different data points over a long period of time. For example, technology platforms can measure how well a potential sales trader, or broker uses voice versus typed communication and how well they can use that communication to leverage client relationships. With this actively taking place over a full-day, or a series of days, it can help to provide corporate partners with graduates who possess soft skills that are required in client facing roles. This can often be hard to find from an initial CV review or telephone interview.

Along with this, technology allows businesses to gather innovative approaches to enhance and revolutionise graduate recruitment, this helps firms find the right candidate for the right role, without having to sift through thousands of CV’s or rely on behavioural data that has been collected from a short game or questions unassociated with the role in question. Due to the innovative approach that technology has enabled, candidates can gain a practical understanding of what their day-to-day role would actually involve, which helps them identify in depth the specific role they can see themselves committing to long-term.

It’s evident that technology is and will continue to revolve and bridge the gap between what students are taught in theory, to what happens in a day-to-day office environment. It has broadened the playing field and identified talents that may never have been uncovered previously. This can lead to businesses becoming more diverse in their workforce and have a greater overall performance and output for their company.

This week Finance Monthly benefits from expert insight into the financial world, with a close look at the development of fintechs and the increasing need for these to come together for the sake of progress. Here Ian Stone, CEO of Vuealta, describes some of the challenges ahead, and the solutions that are already possible.

Between 2010 and 2015, the financial services industry changed drastically. In just those five years, four of today’s most successful fintech companies were launched; namely Stripe, Revolut, Starling Bank and Monzo. These launches all had one thing in common; putting the customer at the centre of the operation, untied to legacy or history. Fast forward and the fintech industry is coming of age, with the UK’s fintech sector alone attracting £1.34 billion of venture capital funding in 2017, and new companies launching into market every day.

Scaling up

This success means that the challenge these companies now face is one of scale. To keep moving forward, they need to be able to expand and scale up quickly and easily to support their growing customer bases. They need to do this at the same time as maintaining the flawless, fully-digitised customer service that they have become synonymous for. No easy feat.

How they play this growth period is therefore vital. They need to be fast in making decisions and flexible enough to adapt to the constant changes that are now part and parcel of today’s market. That means arming themselves with the tools and information that will help them achieve that.

A new age of planning

The key is in the planning. As digital companies, fintechs already benefit from high levels of flexibility and adaptability. These traits must also be reflected in how they approach their business planning if they stand a chance of still being relevant five years down the road. A recent survey by Ernst & Young revealed that a third of UK fintech companies believe that they’re likely to IPO in that timeframe – a clear demonstration of the rewards that can be reaped from staying successful. What will set the successes apart from the failures is connectivity. A more connected company with a more connected approach to how it plans will be more successful.

Realising a connected approach to planning

By connecting their people, processes and data, fintech companies will be able to more accurately forecast their revenue, costs and liquidity on a monthly if not weekly or daily basis. They’ll be able to model and digest significant variations in activity and resources, as well as changes in operating models and growth scenarios.

Holding information in different siloes makes it almost impossible for a business to have an accurate view of where money is being spent, meaning the value of forecasts are limited. For those looking to scale up their operations, both from a size and geography point of view, these forecast insights are invaluable. Expansion is an expensive business, so using the company’s data, connecting it and breaking down those silos to make more informed, accurate decisions will help ensure that they don’t burn through valuable capital.

It will also help them stay nimble. This is a period of significant change, with new regulations, political fluctuations affecting currency rates, access to skills and trade deals, amongst other things. The future is unclear so staying nimble means having a clear view and plan for what multiple futures could look like. By having a holistic view of how the entire business is performing and then using that data to forecast where it is likely to be in one, three, ten years’ time, the future becomes much more predictable and achievable. Suddenly, a fintech company can start making decisions now that before may have seemed too risky.

When implemented properly at both a technological and an organisational level, connected planning provides an intuitive map of how decisions ripple through an entire organisation. That is only possible with a real-time overview of the business and the ability to quickly understand the impact of any market changes. This is a critical point for fintech companies.

The competition is growing and although the larger banks will never be able to match new fintechs in terms of agility, they have experience, big customer bases and money on their side. Taking a more connected approach to how fintechs plan will be key to success. Only with a clear view of how the business is performing and scenarios for when that performance is jeopardised, will these companies cement their place in the future of finance.

A study from Dun & Bradstreet recently revealed that while finance leaders remain tasked with business profitability, their remit has expanded to include the sharing of data across the organisation and management of risk.

The Risk Revolution found the top challenge for finance leaders today is monitoring risks within a business’ customer, supplier, or partner base (38%). The second biggest concern for finance leaders was found to be forecasting or predicting risk, while the third was growing profitability.

When it comes to managing risk, data is an invaluable insight for businesses. However, according to the study, 60% of finance leaders said that their data currently exists in organisational silos, with over half reporting difficulty sharing, linking and using data to drive their risk management strategies and are unable therefore to effectively harness the data to mitigate and manage business risk.

Commenting on the report, Tim Vine, Head of European Trade Credit at Dun & Bradstreet said: “A changing business environment, coupled with political and economic uncertainty, is making it increasingly challenging for finance leaders to manage risk effectively. Data-driven tools can uncover valuable insights to inform strategic decisions and drive business performance, but our report shows that adoption of these tools is still relatively low. Finance leaders who are able to leverage data can help their organisation navigate uncertainties in the market, manage risks and grow profitability.”

(Source: Dun & Bradstreet)

Artificial intelligence (AI) is infiltrating all industries, meaning a transformation in the way we live our day-to-day lives – and the way we work – is inevitable. But this is nothing to be afraid of and we should embrace AI to improve the way we work.

According to Adobe, 15 % of companies currently use AI, with 31 % expected to adopt it over the next 12 months. This significant technological disruption is set to affect everyone in some form, and many are worried that AI will displace our jobs and make humans irrelevant.

However, Reed Accountancy & Finance research found that almost half (47 %) of finance professionals asked are enthusiastic about AI in the workplace and are willing to embrace new technology. This shows there is a lot of enthusiasm about all the ways AI can improve our everyday activities. With this in mind, here are five reasons why we shouldn’t be panicking about the introduction of AI into the workplace.

1. There is strength in humanity

Research from Deloitte shows that 61 % of companies are now actively designing jobs around robotics. However, it is expected that, in the coming years, the skills and traits that make us human and enable us to interact effectively will become increasingly important for employment and career advancement.  While machines and AI will be capable of performing many routine tasks, human cognitive skills will still be sought after, so businesses will still need to target candidates with these talents. The introduction of AI will also free up time for creative thinking and judgement work – areas in which humans are naturally superior. AI can design solutions to complex societal issues, but only humans can implement them, as well as display empathy and compassion in a way machines never can.

2. Enhanced productivity

A study by Accenture has revealed that AI could increase productivity by 40 %, and profitability by 38 %. This is in addition to our own research which found a third (32 %) of finance professionals believe AI will improve productivity and efficiency by having the capabilities to report and summarise accounts  taking away the menial tasks – understandably, businesses are interested. This means employees are free to concentrate their efforts on more stimulating, forward thinking work, making companies using AI very attractive. It can also help with recruitment, where AI can source, rank and arrange interviews with candidates. More accurate forecasting, predicting maintenance and repairs, personalisation, optimising manufacturing and replenishing stock automatically are all areas in which AI can also help companies become more efficient working within their budgets.

3. Attracting Generation Z

By 2030, it’s estimated that Generation Z will represent 75 % of the workforce, meaning innovative methods of appealing to this group must be a priority for all organisations. One way to do this is by promoting the use of AI in the workplace, as this generation appreciates the value that technology brings.  The use of AI-driven foundational technologies, such as blockchain, may also help companies that are based on this technology present themselves as the more fashionable, innovative places to work.

4. Saying farewell to unconscious bias

Unconscious bias has long been an issue in recruitment, and for those responsible for recruitment in an organisation. Some tech start-ups are already using AI to perform initial interviews, along with facial recognition software to detect body language and emotion cues when screening candidates, in order to eliminate the unconscious bias that is so often found in the human decision-making process. In fact, according to KPMG, 60 % of HR departments are planning to adopt cognitive automation in the next five years with the aim of making recruitment a bias-free procedure.

5. New skills, new jobs

McKinsey research has found that, if AI is adopted by 2030, eight to nine % of labour demand will be in new types of jobs that didn’t exist before. History would suggest that, after a large technological disruption in society, over time, labour markets would adjust in the favour of workers. However, the skills and capabilities required for any job will shift, with the need for more social and emotional skills, such as logical reasoning and creativity, making candidates with these skills in heavy demand.

Navigating the unchartered territory of artificial intelligence can be daunting, but there is no need for businesses or candidates to panic. If used in the right way, AI can be incredibly helpful and vastly improve the effectiveness and efficiency of not just many organisations, but our everyday working lives.