It can be difficult to get a business loan when you’re just starting, anyway. But a loan could open many doors for your business – you could use it to expand operations, update your equipment, or solve cash flow problems related to late payments from customers or seasonal fluctuations in revenue.

If you’ve never gotten a business loan before, the process can be intimidating. But it doesn’t have to be. Follow these steps to get the funding your business needs.

Look Into Your Options

There are lots of loan options available to small business owners, and lots of lenders to choose from. So, the first step is to look into your options in terms of lenders and types of loans available. 

Start by considering what you’re going to use the loan for. If you want to expand your small business or upgrade your equipment, a traditional small business loan backed by the SBA might be ideal. If you need to borrow money to cover daily operating expenses, consider a business line of credit or a business credit card. If you need to fund a startup, have bad credit, or need the funds quickly, you should consider a short-term loan or a merchant cash advance from an alternative online lender. Make sure to compare interest rates and repayment terms for different loan products and lenders before you make a final decision.

Make Sure You Can Handle Repayments

The rule of thumb when running a business is that you should be bringing in 1.25 times your total operating expenses in revenue. That means if your business brings in $10,000 a month, and your operating expenses are $6,000, you can afford $2,000 a month in loan repayments. Remember that some alternative lenders require daily or weekly repayment schedules, so you may be making many payments each month.

Get Together Your Documentation

Online lenders may not require as much documentation for small business loans as traditional lenders, and they’re less likely to require collateral, too. You may need to prepare a business plan or a proposal outlining how you plan to use the money, as well as basic information about your business. You may also need to prove your business income using profit and loss statements, bank account statements, and tax returns. You’ll need to provide Social Security numbers and other information for all of the business owners. You may need to sign a personal guarantee and put up collateral. 

Apply

Once you have all your documentation ready, you can apply for your business loan. If you go through an alternative lender, you can apply online and get approved right away. Banks and credit unions giving more traditional business loans will make you apply in person at a branch or over the phone. If you need help preparing your loan application, go to your local Small Business Development Center to get assistance. They can help you make sure that you’re providing everything the lender needs and that the loan application is formatted correctly. The more you can cut down on the interaction between you and your lender during the underwriting process, the faster you will get your loan funds.

Read Your Loan Agreement

You should always read contracts before you sign them, including loan agreements. Your business loan agreement spells out the terms of your business loan, including how much you’ve borrowed and what your repayment schedule is. Interest rates, fees, penalties for late payments, and payment amounts should also be outlined in the loan agreement. 

Review your loan agreement carefully and note any questions you might have for the lender. Again, seek help from your local Small Business Development Center if you need it, or reach out to a business attorney. Contact your lender for answers to any questions you might have or clarification on confusing points. Once you’re satisfied, you’ll sign the loan agreement and return it to the lender.

Get the Money

Now that your loan is approved, you can get your money. These days, lenders typically disburse loan amounts by direct deposit. You can get your loan money deposited into your business checking account. 

Don’t be intimidated by the prospect of getting a small business loan. It’s easier than ever to borrow money for your business. As long as you can afford to make the repayments, a small business loan can benefit your business. You could get the funds to expand, update equipment, cover day-to-day operating expenses during a slow period, and more.

Here Finance Monthly hears from James Dudbridge, Associate Director at tax credit specialists ForrestBrown, who explains how to  appropriately navigate a HMRC enquiry.

Research and development (R&D) tax credits are a government incentive designed to reward UK companies for investing in innovation. They’re a valuable source of cash for businesses and support significant growth. HMRC itself found that for every £1 of tax foregone, up to £2.35 of additional R&D is stimulated. In recent years, HMRC has focused its efforts on increasing awareness of the incentives and it has seen success, with the volume of claims being made booming. Around 50,000 claims were made for the 2017-18 tax year alone – a 31% increase on the prior year.

But this success has prompted greater scrutiny of the submissions being made. Firstly, because HMRC has a duty to ensure taxpayers’ money is being used efficiently. Secondly, because HMRC recently uncovered a high-profile instance of fraudulent activity, said to be worth as much as £300m to the public purse.

This greater scrutiny takes the form of enquiries. Put simply, this is when a taxpayer gets a letter from HMRC asking for further information relating to their R&D tax credit claim. It may be worded as a “compliance check”, but in reality, it’s an investigation, and should be treated with the gravity it deserves.

While HMRC doesn’t release data about the volume of enquiries it undertakes, estimates suggest it’s about 5-10% of all claims submitted[i]. That’s potentially as many as 5,000 investigations a year. These can be prompted by any number of factors. It could be that there’s a simple, honest mistake spotted by an HMRC inspector. It could be that HMRC requires more information surrounding specific parts of the claim. Or it could relate to a wider tax position. Sometimes it can be as simple as HMRC deciding it wants to study a specific sector, or technology, in greater detail.

With more enquiries being launched than ever before, it’s important to be prepared. While the vast majority take place before any money is handed over, there are some cases where enquiries are opened after the R&D tax credit has been paid. When that happens, not only may you have to hand back cash that may already have been spent or allocated, but interest may also be charged. In all cases there is also the possibility of penalties applying if any part of the original claim is found to be incorrect.

Not only may you have to hand back cash that may already have been spent or allocated, but interest may also be charged.

But it’s not just the financial impact. If an enquiry isn’t handled effectively, an enquiry can seriously impact your relationship with the tax authority. This can make all subsequent tax issues harder to deal with. Furthermore, an enquiry can take anything from a few months up to several years to resolve. That’s time and resource being spent trying to fix the issue – with multiple people involved from around your business. It can be a massive drain. Not to mention the stress and frustration it might cause.

Avoiding an enquiry

All this begs the question: how can you avoid being the subject of these types of investigation? In some cases, you can’t. You might just be picked at random. But it is possible to reduce the likelihood, and, crucially, increase your chances of a successful resolution if it happens.

Firstly, be prepared. Just because you’ve received a benefit in the past, it doesn’t mean it will be seamless next time – even if you follow the exact same process. The same level of scrutiny should be given each and every year when making a claim – and if it transpires previous documents weren’t quite right, action needs to be taken. Simply updating documentation from your prior year isn’t enough – what HMRC expects in support of claims has changed – and so your paperwork needs to too.

Secondly, it’s vital that those preparing the paperwork are crystal clear on the criteria. Worryingly, some aren’t. Once we outline to them exactly what can go into a submission, they realise they’ve been getting it wrong. In most cases, it’s not intentional. It’s just a lack of understanding about the parameters of the relief. Claims prepared by non-experts quite often don’t properly consider the boundaries of R&D projects – something that HMRC has asked for in recent guidance.

There’s also a need to have a strong understanding of the underlying science or technology, which can be a challenge where a finance team prepares a submission. HMRC will want to see this presented in a particular way. There are then strict categories of costs involved which can be included in the claim.

Top tips for handling an enquiry

If an enquiry happens, you need to act swiftly and judiciously. Once the HMRC letter arrives, be open, be honest, be transparent and be collaborative. It’s important to begin building a positive relationship with your HMRC inspector immediately. Your first response will set the tone for the rest of the process.

At first, there may just be generic questions to answer. Don’t let this fool you. You need to think carefully about the claim you’ve submitted. Try to get ahead of any possible risk areas. Within reason, HMRC will be open to you defending parts of your claim that they may have challenged.

Don’t keep the enquiry away from people within the business. Getting the right information together for HMRC will usually involve a number of different stakeholders in the business, such as the legal team, the finance department and the technical experts. They can all help guide the process and provide insight and expertise to ensure the best possible outcome.

It’s always worth bringing in specialist external support with a strong pedigree in dealing with enquiries. They can help guide you through choppy waters and provide expert advice on all aspects of the enquiry. When engaging with an enquiry support service, the first step is full disclosure. Don’t hold anything back and give them access to your experts for interview.

The next step is to revisit all the costs that made up the R&D tax credit claim and review them again in full. Once this is completed, you will have a strategy in place designed to resolve the enquiry with the best possible outcome for your business. This will often involve formal written responses, as well as preparation of key personnel for any call or meeting required with HMRC.

[ymal]

A silver lining

An enquiry can be a positive learning process. Having been the subject of an enquiry, those involved will be armed with the knowledge they need to ensure subsequent claims are robust and cover all of the areas that HMRC expect to see for that business. This is invaluable – and has a real monetary benefit. It can be the difference between a useful lump sum of capital and a failed claim with significant operational costs.

Although enquiries aren’t necessarily positive experiences, we should welcome their existence. HMRC is enforcing best-practice and it’s reassuring to know that public finances are being protected from potentially fraudulent activity.

If you haven’t made an R&D tax credit claim before and are considering it for the first time, it’s important not to be put off. That said, given HMRC’s focus on quality, it’s worth choosing an adviser with care. Look for a multidisciplinary team who hold professional credentials across accounting, tax and law. Seek evidence of supervision by the Chartered Institute of Taxation. Be assured they adhere to HMRC’s agent strategy.

This will ensure that your claim is not only fully maximised, but also protected from risk. Meaning that when you receive your benefit, you can do with it what the government intended: invest it back into your business to spark your next big push or fund the start of something remarkable.

[i] Estimate made by ForrestBrown

The shared service approach provides a centre of excellence within large businesses, but according to Andrew Hayden, Senior Product Marketing Manager at Winshuttle, the challenge finance organisations often face is how to successfully transition separate business units’ processes and data into one single set of systems, and it can be an onerous process which, unless handled correctly, could result in less efficiency, not more.

The shared services model can help corporate finance teams meet their efficiency targets but avoiding the inefficiency trap caused by moving and transforming financial data into one place is essential if the business is going to meet strict efficiency targets.

Beyond ‘lift and shift’

When an organisation decides to move to a centralised shared service approach, the first step is usually to pull existing financial processes out of the hands of disparate accounting functions and business subsidiaries and pass them all into the new central function. Adopting this new structure typically means one team now handles all financial transactions, but they are still using a variety of systems – from spreadsheets and homegrown software to individual accounting platforms.

Implementing shared services requires a high degree of change within the business, and so it makes sense to maximise the benefits of doing so. This can only really be achieved when the actual financial processes themselves are streamlined to one central financial platform, quite commonly SAP.

A significant part of this system consolidation is the movement of data from A to B. Moving huge volumes of data manually is slow and time-consuming, and one approach that some shared service centres are adopting to significantly speed up operations is robotic process automation (RPA).

RPA in action

Here, we look at how SAP-specific RPA software solutions helped organisations including Vodafone, Anglo-American, and Novacon successfully streamline data in their shared financial services environments.

Vodafone decreases transaction processing time

At Vodafone, the shared financial services centre now handles the bulk of the organisation’s financial management, processes and transactions including fixed assets, Purchase to Pay, Record to Report and General Ledger.

Handling considerable volumes of assets within one SAP database proved challenging in this dynamic and frequently changing environment. In one area of the business, Vodafone had nine million assets and 100 thousand postings per month, which would typically take six months to process.

The task of doing so included using five different SAP screens and two different transactions, so a 100-line item record would take up to 60 minutes to process manually. To drive shared services efficiency, Vodafone used an SAP-specific RPA solution. It automatically posts data to SAP via Vodafone Excel workbooks, eliminating data entry through the SAP GUI and reducing the processing time to 15 minutes.

“The system works very well for us,” says Peter Barta, Asset and Project Accounting Team Leader, Vodafone, adding “our complicated processes are handled in fewer steps, which reduces time spent on complex postings and allows us to avoid any internal IT debt.”

Anglo-American increase efficiency savings by 80%

Anglo-American needed to implement a global shared services project to optimise business processes through common procedures. This required thousands of entries that needed to be manually processed on a daily, weekly and monthly basis. This repetitive and time-consuming task needed an effective solution without increasing resource capacity.

By choosing an SAP-specific RPA solution, Anglo-American was able to overcome these challenges without needing to employ specialists to transfer volumes of data. Procedures that would normally take a week now take only a day to process, increasing efficiency savings by 80%.

Novacon prevents data entry errors before they happen

Novacon, a lean management data company, faced challenges with data and process accuracy when working with a large shared service centre. Using an SAP-specific RPA solution it validated data entry against all business and SAP rules, preventing errors before they happen with a rate of 99+% accuracy in SAP. This also enabled a shorter development time of two months and at a lower cost compared to generic RPA technology.

Without doubt, shared services centres offer significant potential for finance to become more efficient, but it must be approached correctly, especially when it comes to the transference of data. Otherwise the organisation could find itself stuck in the inefficiency trap.

Below, Harpreet Singh, Executive Director at Brickendon, delves into some case studies and examples that point towards an evolving workplace, remarking on the financial services sectors and its need to conform or adapt.

In November 2018, tens of thousands of Google employees conducted a worldwide walkout targeting workplace culture less than a year after the internet giant topped Fortune magazine’s list of best companies to work for the sixth year running. The protestors’ main issue was how the company was treating women, but this wasn’t their only concern.

Following the protests, media reports cited Google saying it would increase transparency and improve its harassment policies, but it shouldn’t have taken a revolt of this scale for the issues to be acknowledged. Jose Mourinho, former manager of Manchester United, who was unceremoniously sacked in December, may have the answer to Google’s problems.

Speaking to the media in January, Mourinho, one of the most successful football managers of the last two decades, said: “Nowadays you have to be very smart in the way you read your players”. He then went on to compare current players with players from previous generations and spoke about the increased need to have the right structure in the club to support the players and the manager. Like football, employee demographics in the corporate world have changed significantly over the past decade. According to a recent study by Deloitte, 75% of the global workforce will be millennials by 2025. And therein lies the problem. In the same way as Mourinho believed Manchester United was not reading its players correctly, neither, if recent events are taken into account, are many businesses.

The expectation of flexibility is neither misplaced nor impossible

In addition to having been born and grown up in an online age, there are several characteristics that differentiate millennials from previous generations. Whilst they consider themselves equally as hardworking and as ambitious, if not more so, than generation x and baby boomers, they also require more flexibility, faster results and care more about their personal well-being. According to a report in US news magazine INC., more than half of all millennial workers would like the option to work remotely, while up to 87% want to work on their own schedules.

They also perceive themselves to be more socially aware and eco-friendly and expect these traits from their employers too. Luckily, with the significant improvements in technology over the past decade, this expectation is neither misplaced nor impossible to achieve, as long as employers are prepared to innovate.

Technological improvements make remote working an easy option

Take flexibility, eco-friendliness and well-being for example. With massive improvements in communication-related technology, it is now possible to work remotely without any loss of productivity. Providing flexible working options not only reduces real-estate costs and lowers the firm’s carbon footprint but can also help increase employee motivation.

So, if done correctly, one single action or statement, such as allowing employees to start work earlier or later, or to take longer lunch breaks to facilitate participation in sporting activities, can lead to a chain of events that significantly improves the attractiveness of an employer.

But, the reverse is also true. What if a telecommuting employee needs to come into the office for a face-to-face meeting and realises that he/she doesn’t have a desk to work from? The obvious impact is a decrease in efficiency. However, research shows that not knowing whether you have a desk space can also lead to lack of motivation and stress and can in turn, have a serious impact on an employee’s overall well-being. In addition, it can create an environment of unhealthy competition due to a lack of information, in this case, related to desk space and employee whereabouts. Unlike employees from previous generations, millennials don’t tend to feel the same connection to their company and as a result will not stay somewhere they are not happy.

It’s all about work-life balance

As a result, it may be worth managers considering the way in which a flexible work schedule provides a stronger sense of work-life balance – a quality that is reported to attract millennial employees to a workplace in droves and keep them happier for longer than the two-year stint that has become the norm.

It may be worth managers considering the way in which a flexible work schedule provides a stronger sense of work-life balance.

Typically, desk space is the responsibility of real-estate management teams and doesn’t list as a top priority for senior operational managers. Desk allocations are usually managed on spreadsheets or similar static data-storage tools, which don’t allow for the constant monitoring required for effective desk-space allocation. Technology can again rectify this situation, with tools (such as HotDeskPlus, a new workplace optimisation tool and app powered by Brickendon Digital) that use mobile apps, sensors and QR codes to allow employees to view, reserve and check-in-and-out of specific desk spaces at a specific time.

Millennials may require more recognition and faster routes to promotion

Equally important is to foresee the problems that may arise as time evolves and millennials move through the ranks and take up senior positions. They may require more recognition and therefore faster routes to promotion. At the same time, incoming employees may prefer a more informal and non-hierarchical structure. This will require a shift in the organisational model and a willingness to embrace change in a way not seen before.

A quick look at the last couple of years reveals that many CEOs were either asked to leave their positions or forced to deal with discontented employees. These non-unionised breeds of relatively new organisations, such as Google, Microsoft and Uber, were expected to be torch bearers for the next generation of working practices, but their actions have largely been reactive. There is no doubt that what is thought to be an isolated incident can very quickly gain momentum and become a global phenomenon.

So, when it comes to millennials, you may want to count (and listen to) your chickens before they tweet, otherwise they may leave your roost sooner than you expect.

As global business and cross-border transactions have proliferated, there are significant implications for commercial customers who rely on banks and payments providers to provide a flawless service faster than ever. So how do can the financial services sector put value back into the process? Below Abhijit Deb, Head of Banking & Financial Services, UK & Ireland, Cognizant, explains for Finance Monthly.

Consumers now expect easy and immediate payment services, no matter where they are or what they are buying, whatever the payment method. It may be symptomatic of the ‘age of instant gratification,’ but it also demonstrates how people value financial agility. This was highlighted by a recent system failure with the UK’s Faster Payments System that caused mass inconvenience and frustration among consumers. Whether paying a friend back for last night’s dinner or sending emergency funds to family travelling overseas, the offerings of digital banks such as Monzo and Starling are testament to the industry’s efforts to keep up with rapidly evolving consumer expectations. This trend has now also filtered into the business world.

The technological saturation of the financial services industry has been met with an increasing affinity for risk amongst business customers. Churn has never been easier. If one bank cannot meet their needs, customers can leave, and it has never been easier for them to switch financial providers in a congested market. In essence, the evolution of the payments ecosystem encompasses much more than innovation targeted at consumers.

Understanding the value of payment data

Of course, there are some interesting examples of innovation in consumer payments. Gemalto’s biometric bank card, for example, highlights that the area is steadily advancing, despite scepticism that there will be mass consumer acceptance.

However, the pace of change is accelerating rapidly in terms of offerings. For instance, blockchain is being harnessed by banks and technology vendors as a prime enabler of an instant B2B payments infrastructure. Industry players realise that the methods that can derive benefits today are largely based on a better understanding of the value of payment data.

While such data has mostly been used to create a hyper-personalised customer experience for consumers, it is increasingly being harnessed in services to businesses, even outside the financial services sector with companies such as Google recently purchasing Mastercard credit card information to track users’ spending to create an additional revenue stream.

This evolution of B2B product consumption is emerging as a key theme across the broader financial services market and is increasingly allowing businesses of all sizes to ‘window shop’ for the products and services they want the most. Providers are racing to commercialise the increasing amounts of account information, a trend that has increased in the wake of regulation such as PSD2 (the Second Payment Services Directive). By doing so, they can position themselves as the customer’s ‘digital front door’ to a wider range of services such as financial advice, merging the dimensions of ‘fast money’ (a consumer’s daily spending) and ‘slow money’ (future spending, saving and investment).

Adopting innovations such as automation, means that banks and card providers can help their commercial customers transform payments into a process that can add real value and allow the integration of additional services. By making financial reporting much easier, organisations can glean better insights into data showing purchasing trends among their customer base. The emergence of machine learning and self-learning systems will make this process much more efficient, even incorporating features like automated financial advice or fraud detection to become commonplace.

Consumption models are changing

Therefore, as payments processors and providers realise the opportunities in the business payments ecosystem, innovation accompanied by a commoditisation of payments services is on the increase, characterised by providers trying to add more value in the supply chain. Although currently most relevant to the SME market, companies of all sizes are being targeted with added value payments services such as reporting, to help them make better decisions. For example, retailers working with Barclays have access to add-ons and third party apps via the bank’s SmartBusiness Dashboard, including basic analytics to see what customers are spending their money on. This information can then inform marketing schemes that tailor product promotions to specific customers.

Ultimately, the more choice the customer has and the more informed they feel, the more likely they are to return to the same bank to take out a loan or use other services.

With so many contributors to the payments ecosystem, and an increasing number of organisations using the analysis of payment data as a key differentiator against competitors, it is crucial that banks, regulators and payments processors co-ordinate their efforts and use the best technology available to create an efficient system. And with the Faster Payments Service deal up for renewal, a system that underpins most of the UK’s banks and building societies, perhaps it is time for the government to consider how it can best support a payments infrastructure that works for all.

Following recent incidents such as TSB's systems failure and Visa's service outage, operational resilience is increasingly vital. Bank of England and FCA recently published a report stressing the importance of business continuity during a disaster. Below Finance Monthly hears from Peter Groucutt, Managing Director at Databarracks, who discusses what businesses need/can to do to strengthen their operational resilience during a disaster to absorb any shock a business may experience.

In July 2018, the Bank of England, Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) published a joint discussion paper aimed at engaging with the financial services industry to improve the operational resilience of firms and financial market infrastructures (FMIs).

At the time it was issued, banks and FMI’s were capturing media attention, following several high-profile incidents.

TSB’s failed IT migration has been well publicised, costing the firm £176.4m in various fees and leading to the departure of its chief executive, Paul Pester. In June 2018, shortly before the release of this paper, millions of people and businesses were unable to pay for shopping due to a sudden failure of Visa’s card payment system.

Financial services lead in business continuity

The financial services industry is a leader in business continuity and operational resilience. It has a requirement of a high level of systems-uptime and is well-regulated. The best practices it introduces are often taken and more widely adopted by other industries. Our own research supports this. Our annual Data Health Check survey provides a snapshot of the IT industry from the perspective of over 400 IT decision-makers. The findings from this year’s survey provided some revealing insights.

64% of financial institutions had a business continuity plan in place, compared to an industry average of 53%. Of the financial sector firms with a specific IT disaster recovery process within their business continuity plan, 64% had tested this in the past 12 months – compared to 47% across other industries. Finally, 81% of financial firms had tested their IT disaster recovery plans against cyber threats, versus 68% of firms in other sectors.

While these findings reinforce the strength of the industry’s operational resilience, incidents like TSB and Visa prove it is not immune to failures.

The regulators want to “commence a dialogue that achieves a step-change in the operational resilience of firms and FMIs”. The report takes a mature view to the kind of incidents firms may face and accepts that some disruptions are inevitable. It provides useful advice that can be taken and applied not only to the financial services community, but other industries too.

Leveraging advice to improve operational resilience

So, what can be learned from this report? Firstly, setting board-approved impact tolerances is an excellent suggestion. This describes the amount of disruption a firm can tolerate and helps senior management prioritise their investment decisions in preparation for incidents. This is fundamental to all good continuity planning; particularly as new technologies emerge, and customer demand for instant access to information intensifies. These tolerances are essential for defining how a business builds its operational practices.

Additionally, focusing on business services rather than systems is another important recommendation. Designing your systems and processes on the assumption there will be disruptions – but ensuring you can continue to deliver business services is key.

It’s also pleasing to see the report highlight the increased concentration of risk due to a limited number of technology providers. This is particularly prevalent in the financial sector for payment systems, but again there are parallels with other industries and technologies. Cloud computing, for example, it’s reaching a state of oligopoly, with the market dominated by a small number of key players. For customers of those cloud services, it can lead to a heavy reliance on a single company. This poses a significant supplier risk.

Next steps

Looking ahead, the BoE, PRA and FCA have set a deadline of Friday 5^th October for interested parties and stakeholders to share their observations. The supervisory authorities will use these responses to inform current supervisory activity, helping to dictate future policy-making. The supervisory authorities will then share relevant information with the Financial Policy Committee (FPC), supporting its efforts to build resilience in the financial system.

Firms looking to improve their operational resilience should take advantage of this excellent resource – whether in financial services or not.

As payment methods become more seamless to cater for consumers who demand a quick and easy user experience, concerns around protection of payment details have been mounting. Here Finance Monthly hears from James Romer, Chief Security Architect for SecureAuth, on the ins and outs of customer payment information, how it’s controlled and the potentials for multi factor authentication.

In light of recent data breaches, consumer trust in the ability of businesses to keep their data safe is at a low. Despite being well-established and active for decades, authentication techniques such as username and password for online payment portals, have been failing consumers and financial institutions for years, as they are simply no longer enough to defend against bad actors. It is clear that more advanced authentication techniques are needed to keep our finances and data secure.

Why two factor authentication isn’t enough

To defend against increasingly sophisticated attacks on financial services, a comprehensive and intelligent approach is needed. A strategy that focuses on where most breaches occur – i.e. the identity level – and combines multiple authentication techniques that do not hinder the user is needed. Multi-factor authentication (MFA) combines a minimum of three factors: ‘something you are’ (for example, a facial scan), ‘something you have’ (such as a bank card) and ‘something you know’ (a passphrase or password) and can improve identity security both in the payment transaction process, as well as when the customer is accessing a payment portal.

To improve security around online transactions, two-factor authentication (2FA) was introduced to bolster traditional username and password methods. It involves using an additional verification step; such as information that’s unique to the individual, a physical token or an SMS one-time passcode (also known as SMS OTP). While 2FA was a step in the right direction, and might deflect the average attacker, for a motivated one it’s no longer enough. Phone-based authentication and knowledge-based questions can be easily defeated by determined attackers, as seen with the recent Reddit data breach. This pitfall, combined with the less than user-friendly experience, and delays that often accompany 2FA, financial organisations need to re-think their security strategy.

Applications in the financial industry

MFA has the potential to transform payment transactions and customer experience when accessing financial information, helping to protect against fraud whilst at the same time improving usability for the consumer. Overall, the user experience with multi-factor authentication is seamless, making a strong case for a move away from the 2FA approach for good. For example, looking at contactless transactions the end user will simply present their card, while holding their enrolled finger over the embedded fingerprint reader during the POS transaction. Verification of the fingerprint is performed on the card during the transaction, using a pre-enrolled template. If the fingerprint matches, then the transaction is approved. If the read or the match fails, then an additional challenge (for example PIN) can be offered.

But it’s not just cards that this can be applied to. When a customer is accessing an online payment portal, adequately authenticating the user is critical to protecting sensitive data. Although customers are accustomed to (and often reassured by) lengthy authentication processes, a reduced number of steps will greatly improve the quality and ease of their interaction. Forward-thinking organisations understand this and will implement modern techniques, such as adaptive authentication, where both security and user experience can be enhanced. These techniques act in the background to quickly verify different aspects of the user’s login attempt, considering factors such as location, device used and IP address, without compromising the experience.

For example, SecureAuth worked with a large UK-based financial services enterprise to secure and protect its customer portals. The company recognised that their business model was largely based on repeat custom, so aimed to prioritise customer retention through a personalised personal portal. Following detailed research into the preferences stated by their own customer base, this organisation was able to offer authentication that adapted to the user’s needs and preferences, for instance, by using demographic information to give the most appropriate authentication method based on market research. In addition, repeat users enjoyed a frictionless experience without repeat access requests, as authentication was only required at the transaction phase. This greatly reduced the amount of times that credentials were requested and improved the overall user experience, highlighting how with modern authentication approaches; increased security doesn’t have to impact user experience.

Protection of the authentication process in the financial industry is absolutely essential, as no single authentication technique is beyond the reach of malicious actors. It is only a matter of time before they find a way to circumvent traditional authentication methods. True identity security must rely on multiple factors combined with risk analysis. By implementing adaptive methods that flex and change according to this associated risk, organisations can allow access, deny, step-up or step-down users at the authentication stage. This means that even if a malicious actor possesses one aspect of the user’s unique profile, such as biometric information, then other factors will be considered to authenticate them. In this way, payment and personal information can be protected and consumer trust maintained.

Accounting departments in UK businesses have continued to shift towards digital practices, but more than four in 10 (41%) continue to rely on paper-based processes, according to new independent research.

The 'Changing trends in the purchasing processes of UK businesses' report, commissioned Invu, revealed a slight reduction in the number of businesses relying on paper-based accounting in the last few years.

The 41% in this latest report is a slight fall from the 45% of business finance decision makers who admitted to relying on paper-based accounting in 2016.

But despite the trend towards digital, the report revealed a significant number of finance bosses who admitted that their company was struggling to move fully to a digital based model.

More than half, 56%, said that a paper process was still used at some point within the purchasing process in their business.

Within accounts payable departments in these UK businesses, 16% of finance bosses said their company had not introduced any digital processes at all - relying on totally paper - while nearly a quarter 24% relied on manual scanning and storing of documents.

Ian Smith, General Manager and Finance Director at Invu, said the findings showed a welcome trend of redundancy of paper-based accounting, but said some businesses were still putting themselves at risk by continuing to rely solely on paper.

"Businesses are often dealing with dozens, if not hundreds of invoices and payment enquiries on a daily basis and trying to manage and juggle these requests and demands using paper and filing cabinets can easily lead to finance departments being overwhelmed.

"Delays commonly arising from manual processing of supplier invoices can result in a business being unaware of its future payment commitments - and then it is only a short step further before they end up in severe financial difficulties.

"Given the current focus in the UK on productivity it is frankly staggering that so many companies won't let go of their legacy paper-based systems and free their accounting teams up to add value to the business rather than drown in paper work.

"In a rapidly changing world this report shows a welcome shift towards the use of technology. I’m concerned for the future of the 41% of businesses that appear to be lagging behind”

(Source: Invu)

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)

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.

With the future looking more cashless by the day, the future of cybersecurity looks even more risk heavy. Below Nick Hammond, Lead Advisor for Financial Services at World Wide Technology, discusses with Finance Monthly how banks/financial services firms can ensure a high level of cyber security as we move towards a cashless society.

Debit card payments have overtaken cash use for the first time in the UK. A total of 13.2 billion debit card payments were made in the last year and an estimated 3.4 million people hardly use cash at all, according to banking trade body UK Finance.[1] But with more people in the UK shunning cash in favour of new payments technology, including wearable devices and payment apps as well as debit and credit cards, the effects of IT outages could be more crippling than ever.

Take Visa’s recent crash, for example, which left people unable to buy things or complete transactions. Ultimately, payment providers were unable to receive or send money, causing serious disruption for users. And all because of one hardware issue. Finding new ways to mitigate the risk of system outages is a growing area of focus for financial services firms.

Application Assurance

At a typical bank, there will be around 3,500 software applications which help the bank to deliver all of its services. Of these, about 50-60 are absolutely mission critical. If any of these critical applications goes down, it could result in serious financial, commercial and often regulatory impact.

If the payments processing system goes down, for instance, even for as little as two hours in a whole year, there will be serious impact on the organisation and its customers. The more payments systems change to adapt to new payments technology, the more firms focus their efforts on ensuring that their applications are healthy and functioning properly. As Visa’s recent hardware problems show, much of this work to assure critical applications must lead firms back to the infrastructure that their software runs on.

Having a high level of assurance requires financial services firms to ensure that applications, such as credit card payment systems, are in good health and platformed on modern, standardised infrastructure. Things become tricky when shiny new applications are still tied into creaking legacy systems. For example, if a firm has an application which is running on Windows 2000, or is taking data from an old database elsewhere within the system, it can be difficult for banks to map how they interweave. Consequently, it then becomes difficult to confidently and accurately map all of the system interdependencies which must be understood before attempting to move or upgrade applications.

Protecting the Crown Jewels

Changes to the way financial services firms use technology means that information cannot simply be kept on a closed system and protected from external threats by a firewall. Following the enforcement of Open Banking in January 2018, financial services firms are now required to facilitate third party access to their customers’ accounts via an open Application Programming Interface (API). The software intermediary provides a standardised platform and acts as a gateway to the data, making it essential that banks, financial institutions, and fintechs have the appropriate technology in place.

In addition, data gets stored on employee and customer devices due to the rise of online banking and bring-your- own- device schemes. The proliferation of online and mobile banking, cloud computing, third-party data storage and apps is a double edged sword: while enabling innovative advances, they have also blurred the perimeter around which firms used to be able to build a firewall. is no longer possible to draw a perimeter around the whole system, so firms are now taking the approach of protecting each application individually, ensuring that they are only allowed to share data with other applications that need it.

Financial services firms are increasingly moving away from a product-centric approach to cyber-security. In order to protect their crown jewels, they are focusing on compartmentalising and individually securing their critical applications, such as credit card payment systems, in order to prevent a domino effect if one area comes under attack. But due to archaic legacy infrastructure, it can be difficult for financial institutions to gauge how applications are built into the network and communicating with each other in real-time.

To make matters more difficult, documentation about how pieces of the architecture have been built over the years often no longer exists within the organisation. What began as relatively simple structures twenty years ago have been patched and re-patched in various ways and stitched together. The teams who setup the original systems have often moved on from the firm, and their knowledge of the original body has gone with them.

The Next Steps

So how can this problem be overcome? Understanding how applications are built into the system and how they speak to one another is a crucial first step when it comes to writing security policies for individual applications. Companies are trying to gain a clear insight into infrastructure, and to create a real-time picture of the entire network.

As our society moves further away from cash payments and more towards payments technology , banks need the confidence to know that their payments systems are running, available and secure at all times. In order to ensure this, companies can install applications on a production network before installation on the real system. This involves creating a test environment that emulates the “real” network as closely as possible. Financial players can create a software testing environment that is cost-effective and scalable by using virtualisation software to install multiple instances of the same or different operating systems on the same physical machine.

As their network grows, additional physical machines can be added to grow the test environment. This will continue to simulate the production network and allow for the avoidance of costly mistakes in deploying new operating systems and applications, or making big configuration changes to the software or network infrastructure.

Due to the growth in payments data, application owners and compliance officers need to be open to talking about infrastructure, and get a clear sense of whether their critical applications are healthy, so that they can assure them and wrap security policies around them. An in-depth understanding of the existing systems will enable financial services firms to then upgrade current processes, complete documentation and implement standards to mitigate risk.

[1] http://uk.businessinsider.com/card-payments-overtake-cash-in-uk-first-time-2018-6

Owning a home is one of the biggest dreams for many, yet the process of buying any property can be laborious and flooded with additional fees, delays and disappointments. Blockchain may just be able to chain that. Below Finance Monthly benefits from expert insight from Kai Peeters, the Founder and CEO of HiP, on the implementation of blockchain in the real estate sector.

We are now bearing witness to blockchain based technology coming out of its infancy, and showing how it can be applied to vastly improve multiple markets - including the archaic property market. With a few established businesses and technology giants warming to blockchain, we have to start asking more profound questions about/around how it could improve the situation for a buyer/ buyers and the real estate market as a whole.

The current housing market simply does not work for the majority of first-time buyers. Working exclusively with traditional financial institutions, real estate markets around the globe confine first-time buyers in long-term unmovable loans that put enormous pressure on young people looking to buy a home. This is why, despite interest rates being reasonably low, the number of new mortgages has been declining since the 1990s. Meanwhile, the minimum deposit is largely unaffordable for people who earn average wages, and without help from their family it is virtually impossible for them to get on the property ladder. Technology can transform the way we buy and sell real estate by eliminating additional costs and disorganization of our housing market, Smart contracts that can handle that aspect more efficiently.

Having a decentralized real estate platform addresses current market issues, and introduces the individual investors who can fill the void left by traditional financial institutions and inject more life into the market. This can also allow property to become a more valuable asset in itself, where each buyer is able to release equity without losing ownership, and raise money free of debt. Being able to turn equity into currency and have control over debt levels brings the choice back to the buyers, owners and investors.

The upcoming platform HiP was designed with all those benefits in mind, especially for first time buyers, who can use an inbuilt calculator to enter the price of the property they want to purchase as well as the down payment and monthly payments they can afford. HiP will then calculate the remaining amount needed to buy the property and this outstanding amount is offered out to investors. This means that the first-time buyer will own a percentage of the property whilst also being entitled to a proportional percentage of profit and capitals gains when sold. Investors on the HiP Exchange who have co-financed the property will also receive return on their percentage of the real estate equity they own.

This is a new world of opportunity for first time buyers who now have access to other financing options that were previously unattainable to them. With HiP focusing on the way we fund properties, and other innovative minds using blockchain based technology in other areas of the real estate sector, it is only a matter of time until the array of problems within the real estate markets becomes a thing of the past.