It’s estimated that 81% of finance teams are currently undergoing finance transformation, yet research by Gartner reveals that seven out of 10 finance transformations fail.

This article, authored by Laura Timms, Product Strategy Manager at MHR Analytics, based on the new finance analytics guide from MHR Analytics, will reveal the benefits of adopting analytics to supercharge your efforts and help ensure that your finance transformation is a successful one.

Finance strategy that’s aligned with future business needs

Transformation is more than simply hitting a financial goal. It’s about being able to respond to the current and future needs of the organisation – something that can only be achieved when finance is connected to the wider business.

Unfortunately, with all of the demand that finance teams receive, it can be easy to fail to recognise how financial activity translates into everyday business.

This can lead teams working introspectively, which can quickly translate into silos, with poor communication of information, lower levels productivity and consequently a less valuable finance team.

To prevent this from happening, the financial strategy needs to be aligned with activity across the business, and analytics provides the platform to do exactly that.

Using a data warehouse, data from across the organisation can be synced to give finance teams real-time insights into how changes in one area of the business will impact the course of action they take.

This means that finance teams are able to steer away from getting caught up in metrics like historical spend and industry benchmarks, and are instead grounded in how the finance strategy relates to the unique needs of their business.

Using a data warehouse, data from across the organisation can be synced to give finance teams real-time insights into how changes in one area of the business will impact the course of action they take.

1. Focus on high-value tasks

According to Gartner, 56% of companies are in the evaluation phase of adopting AI to automate accounting & finance processes. By 2020 it’s estimated that 31% of companies will have actually implemented this into their business and 26% in “operating” mode, where AI is actively used in accounting & finance processes.

But what does this mean for finance transformation?

Well, AI technology is providing a platform that is changing the role of finance teams at a rapid pace. Through automating tedious financial processes, finance teams no longer have to spend their time buried in spreadsheets.

Everything from cash disbursement, revenue management and general accounting could be automated through leveraging analytics – in fact, it’s estimated that up to 40% of financial activity could be automated, and another 17% mostly automated.

Research goes on to reveal that for an accounting team with 40 full-time employees, with an average salary of £60,000 would save around 25,000 hours and nearly £72,000 that would have otherwise been wasted on team members carrying out repetitive tasks.

This time saved can instead be spent on higher-value tasks that facilitate business transformation and allow finance to act as a trusted strategic partner to the business.

2. Understand where to allocate resources

Sometimes it can feel like finance are caught in the middle, with demands left, right and centre of the business. And with eloquent justifications from each department explaining why their project should be prioritised, it can leave finance teams stretched under the pressure to please everyone.

Analytics works to hand back the power to finance teams.

Through interactive dashboards that display performance across the business, finance teams are able to easily identify the key value drivers of financial growth.

This means that they’re able to present stakeholders with “the facts” and justify financial activity, only spending resources on activities that generate the most financial value, whilst cutting unnecessary costs.

On top of this, finance teams can look internally to see what they’re spending their own time and resources on. This can help them to define their list of roles and responsibilities as a department to ensure that they don’t get caught up in low-value tasks.

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3. Make faster, more reliable decisions

At the core of any finance transformation is the need to adapt finance practices to meet increasing business demand.

Despite this, many finance teams are still relying on outdated methods to carry out financial processes.

Relying on spreadsheets to communicate and understand what’s going on in the wider business is a common theme amongst finance, but using manual methods alone leaves room for human error.  In fact, research shows that nearly 90% of spreadsheets contain errors, and this can make it tricky to make decisions with confidence.

This approach also means that teams are often forced to spend hours analysing data and pulling reports. This can lead to lags in getting all-important insights, which delays decision making and can result in “in hindsight” discussions with stakeholders.

Analytics works to streamline financial processes to provide teams with fast and accurate insights at the touch of a button. Through real-time data and automation of once tedious processes, teams can see bumps in the road way in advance and have greater confidence in their decisions.

Sources:

https://emtemp.gcom.cloud/ngw/globalassets/en/finance/documents/trends/cfo-journal-new-digital-workforce.pdf

https://www.gartner.com/en/confirmation/finance/trends/new-digital-workforce

https://emtemp.gcom.cloud/ngw/globalassets/en/finance/documents/insights/hallmarks-of-winning-finance-transformations.pdf

https://www.gartner.com/en/confirmation/finance/insights/finance-transformation

https://emtemp.gcom.cloud/ngw/globalassets/en/finance/documents/insights/defining-the-scope-of-fpa-analytic-support.pdf

https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Deloitte-Analytics/dttl-analytics-us-da-3minFinanceAnalytics.pdf

[2] https://www.mckinsey.com/business-functions/operations/our-insights/new-technology-new-rules-reimagining-the-modern-finance-workforce

https://www.blackline.com/blog/account-reconciliations/3-audit-benefits/?ite=1192&ito=1771&itq=b820f4c8-2db4-44be-bdbf-1230cc9fa177&itx%5Bidio%5D=522393

[1] https://emtemp.gcom.cloud/ngw/globalassets/en/finance/documents/trends/cfo-journal-new-digital-workforce.pdf

[3] https://www2.deloitte.com/gr/en/pages/finance-transformation/topics/finance-transformation.html

https://openviewpartners.com/blog/finance-transformation-the-art-of-getting-more-from-your-finance-team/#.XSxsDuhKiUk

https://www.gartner.com/en/finance/insights/finance-transformation

Applications to MBA programs across the US are declining. WSJ's Jason Bellini traveled to Boston University's Questrom Business School to hear from students who explain why the investment is worth it.

Digital banks raised over $1.1bn in fresh funding throughout 2018 in Britain, a figure that is set to be dwarfed if the current pace of growth continues to demand the attention of investors. Claudio Alvarez, Partner at GP Bullhound, explains for Finance Monthly.

Europe is truly leading the fintech charge, accounting for roughly a third of global fundraising deals in 2019, up from only 15% in the fourth quarter of 2018 according to our data. These are digital firms raising globally significant levels of capital. Adyen, the Dutch payment system, is now one of the frontrunners to become Europe’s first titan, valued at over $50bn. Europe has become a breeding ground for businesses that can go on to challenge US tech dominance, and it is fintech where we will find most success. Europe’s unique capacity for incubating disruptors is a phenomenal trend to have emerged over the past few years.

It’s true, European culture has always been more open to contactless and cashless, in contrast the US, where legislation and the existing banking infrastructure make adopting new technologies in banking slower and more convoluted. Europe has been able to take an early lead, while the US remains fixed on dollar bills.

As the ecosystem evolves, borders will become less relevant and markets more integrated, allowing the big players based in Europe to expand into further geographies with greater ease. European success garners the growth, momentum and trust needed to brave new regions and cultures. Monzo won’t be alone in the US for long.

As the ecosystem evolves, borders will become less relevant and markets more integrated, allowing the big players based in Europe to expand into further geographies with greater ease.

Whilst the Americans’ slow start has allowed European start-ups to become global players, it’s also true that the regulatory environment has distracted the European big banks and opened up the space for innovative and disruptive newcomers. While PSD2 has eaten up the resources of the incumbents, the likes of Monzo and Revolut have focused on consumer experience, product development and fundraising. The result? Newcomers are able to solve problems that older institutions simply don’t have the capacity to address.

However, a word of warning: traditional bricks and mortar banks aren’t dead yet. For one, digital banks will still need to justify the enormous valuations they’ve secured recently, and will have only proved their worth if, in 3 to 5 years’ time, they have managed to persuade consumers to transfer their primary accounts to them, which would allow digital banks to effectively execute on their financial marketplace strategies

Meanwhile, traditional banking institutions have a plethora of options to fend off the fintech threat and most are developing apps and systems that mimic those created by the digital counterparts. Innovation isn’t going to come from internal teams – it needs to be a priority for the old players and they need to invest in third party solutions to excel as truly functional digital platforms in a timely manner. In the first instance, the traditional banks will need to solve the issues that pushed consumers towards the fintechs and secondly, work on attracting consumers to stay by offering, and bettering, the services that make fintech’s most attractive.

Competition breeds innovation. For the fintech ecosystem as a whole, this new need for advancement is only good news – a rising tide lifts all ships. As traditional banks try to innovate and keep pace, we’ll see them investing in other verticals in the fintech market. Banks’ global total IT spend is forecast to reach $297bn by 2021, with cloud-based core banking platforms taking centre stage. Digital banking may have been the first firing pistol, but the knock-on effect of the fintech revolution is being felt across the board.

The fintech boom shows no sign of bust, market confidence is riding high and will continue supporting rapid growth. The aggressive advance of digital banks has opened doors for a whole host of fintech innovation - from cloud-based banking platforms to innovation in the payments sector. The number of verticals that sit within financial services creates a plethora of opportunity for ambitious and bullish fintechs to seize the day.

Open Banking was implemented a year ago to create a revolution in consumer finance. While the initiative is taking time to fully embed, it is without doubt having a profound impact and we expect it to play a central role in the banking sector in the years ahead. As more companies evolve the new technology into live customer journeys, consumers will begin to experience the full benefits of the proposition and demand for Open Banking will increase.

We envisage services going beyond banking data, for example encompassing social media information so consumers can manage their data in one place to gain easier access to tailored services. Open Banking also has the potential to play a key role when it comes to addressing problems such as persistent debt.

Open Banking data greatly enhances companies’ level of understanding of individuals’ financial circumstances, enabling them to better assess their suitability for lending products. For those individuals with thin credit files, for instance, someone relatively new to the country or the self-employed, Open Banking data can be harnessed to get a more accurate view of their capacity to repay credit. The fusion of credit reference agency (CRA) data and granular transactional data is likely to build the best picture of affordability. “Open Banking is still in its infancy and, of course, many challenges still lie ahead, namely an educational deficit regarding how Open Banking can improve consumers’ financial lives, as well as understanding data’s positive predictive capabilities. It is equally important that reassurance is provided around the control and maintenance of individuals’ data, reiterating the information will only be used with their permission and they can revoke access at any time. It’s up to the banks and providers like ourselves to communicate the real life benefits the initiative can bring. We expect 2019 to be a successful year for Open Banking as impetus, insight, awareness and product-based solutions grow.

What are really the concerns, risks or benefits of incoming Brexit changes? Below Finance Monthly hears from Todd Latham, CMO & Head of Product, Currencycloud, who explains what’s truly rocking the fintech sector.

Am I the only one who has had enough of all the “Brexit is coming; the UK is doomed” headlines dominating the news?

The truth is, no one can really know what impact Brexit will have. Combine this uncertainty with the fast pace of modern business, and you might be tempted to throw your ten year plans out of the window.

Should businesses really be worried? Or are there, in fact, more pressing things to be concerned about?

The concerns

The main concern for the fintech industry post-Brexit is that the UK is going to lose its fintech crown, becoming less attractive to both business and workers. Will companies migrate their head offices to the continent? Will the world’s top talent still want to work in the UK? These are the questions keeping some of our fintech leaders awake at night. In reality, contrary to what the scaremongers would have you believe, the fintech industry in the UK is thriving, with firms attracting close to £3bn in venture capital funding in 2017. At Currencycloud, for example, we are expecting to double in size this year, and we had our first ‘billion-dollar month’ in terms of cross-border payments processed in December 2017.

Despite the rocky political times, it’s clear that the strength of fintechs means they are unlikely to be deterred. In addition, our home talent pool is impressive, and many industry essentials are exclusive to the UK. Whether it’s specialised legal firms, a friendly regulatory environment or something as basic as the time zone, there are many factors that are difficult for other nations to replicate, meaning the influx of job seekers to the UK’s fintech sector is unlikely to be affected.

But unfortunately, Brexit will not be all plain sailing. The regulatory and financial hurdles surrounding the loss of passporting will certainly result in logistical challenges for firms operating out of the UK. However, it’s important to see this as just another bump in the road for the fintech industry – no more so than previous obstacles from regulation and investment.

What is clear is that in this volatile business climate, predicting what effect Brexit will have in the future is a minefield of speculation, and ultimately, a waste of time. Instead of worrying about the what-if’s, the sector should be diverting its attention to a regulation that is affecting the industry right now: open banking.

Open banking – The fintech revolution nobody knows about

Open banking, part of the Second Payment Services Directive (PSD2) requirements, is aimed at increasing opportunity in the sector, as fintech companies can now offer traditional banking services – but with a faster, more seamless and exciting user experience.

Fintechs can provide the fresh ideas and agility the banking sector desperately needs, while capitalising on the customer trust and ability to scale the traditional institutions’ offerings. The regulation also ensures that any third party wishing to have access to customer data is subject to greater regulation in accordance to data protection laws - providing a safety net for businesses and customers.

A potential partnership between UK banks and fintechs, if executed correctly, could see a global revolution of the financial industry, and could lend a hand in securing the UK’s place as a top competitor in the market - regardless of EU status.

Innovate – before it is too late

As well as being a safety net for businesses, the key reason open banking is being hailed a monumental change for the fintech and wider financial sector is because it is enabling innovation in a previously stale market and is creating opportunities for fintechs to capitalise on.

In this age of AI and machine learning, customers have grown to expect a level of personalisation, which the traditional banking industry currently lacks as is shown by growing customer interest in alternative banking methods, such as Revolut, Starling and Monzo.

Open banking presents an opportunity for the sector to respond to these customer demands by tailoring traditional banking services to individual customer’s needs and wants. This could be through things such as detailed spending graphs or gamification techniques such as nudging for improved user behaviour.

Although the benefits are clear, this drive for innovation has created a pressured environment for businesses. Our research found that 49% of businesses believe their offer will lose appeal within just two years from launch and 60% of businesses agree that their companies will eventually become irrelevant if they don’t innovate constantly. Working with external organisations could offer businesses a solution to bridging the gap between idea and action. This is where the partnership between banks and fintech could be beneficial for both parties.

Brexit may, or may not, have an impact on where consumers bank down the line – but fintechs should be focusing their attention on the possibilities in the market now. By investing the time and energy on open banking, the fintech sector could have the public shunning high-street bank branches for AI and robo-advisers sooner than we think.

Change is happening – be it political, regulatory or otherwise – but you must determine which change will have the most impact on your individual business. With all the focus on Brexit, it’s easy to understand why less consideration has been given to the impact of open banking regulation. However, perhaps this is where you should be diverting your attention, as the opportunities are endless. As more and more fintech companies are jumping on the bandwagon, the initiative is picking up momentum and, we believe it will soon transform the banking industry as we know it.

The UK’s passion for innovation means it is now seen as a global leader in the development of financial services that are powered by prepaid technology, according to data released by Prepaid International Forum (PIF).

PIF, the not-for-profit trade body representing the prepaid sector, reports that the percentage of UK adults using tech-based financial services has risen to 42% (up from 14% in 2015). The UK is at the forefront of this growing market in Europe, ahead of Spain (37%) and Germany (35%). The UK is third globally to only China (69%) and India (52%).

Fueling this growth in the UK is prepaid, which has become a driving force for the fintech companies who are rapidly transforming the way we pay and get paid. The prepaid sector in Europe is growing faster than anywhere else in the world (up 18% since 2014 compared to just 6% growth in the US) is now worth $131bn*.

Experts believe that the UK’s passion for innovation may help to offset the potential negative effects of a no-deal Brexit, should UK financial service providers lose its right of automatic access to EU markets.

Diane Brocklebank, spokesperson for PIF, says: “The UK is a globally significant player in the creation of prepaid-enabled financial services with consumers keen to adopt new and innovative services and a growing industry of experts with the knowledge needed to develop such products and bring them to market.

“In a global sector, the UK stands out as being a key market and one that should retain its prized status even if it loses its financial passporting rights as a result of a no-deal Brexit.”

The UK’s status in prepaid is significant as it is a sector that is growing much faster than other financial services. In Europe, the 18.6% growth in prepaid since 2014, compares to just 7.8% growth in consumer debit and 5.8% growth in consumer credit markets*.

Diane Brocklebank, continues: “Prepaid and Fintech are the areas where people looking to invest in financial service businesses are seeing the most potential. This is being driven by increased dissatisfaction with mainstream financial services and a desire for greater innovation and flexibility, particularly amongst consumers looking for lower costs and fees as well as smartphone accessible products.

“The UK’s status as a global player is therefore crucial to it continuing to be seen as a key market for such investment. To maintain this, it must continue to be a positive environment for innovation with a supportive regulatory environment and strong skills base.”

(Source: PIF)

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.

The investing landscape has changed significantly over the last decades. Historically, the large banks have been happy enough to manage investors’ money and keep hold of the information. For those wanting to become involved, it was too tough, or too expensive. Here Finance Monthly hears from Kerim Derhalli, CEO at Invstr, on the potential for fintech to succeed in a complex evolving landscape.

Now, with an unprecedented amount of tools at our fingertips to make the process of committing cash to the stock market – or indeed other assets such as bonds – much easier, you’d expect us to be experiencing a golden age for financial independence and empowerment.

Despite this, the data tells a very different story. A recent US study by Gallup, for example, found that the combined age of adults younger than 35 with money in the stock market in 2017 and 2018 stands at 37%, down from 52% in the two years leading up to the financial crash.

While it’s true that a lingering distrust of financial institutions is impacting millennial sentiment towards stock ownership there’s a bigger story here of a more fundamental failing across the fintech industry – which is still not even scratching the surface of its potential.

Let’s look at this in simple, real world terms. If I were to stand on a street corner and hand out £5 notes to anyone passing by, I'm sure I would have several million people taking up the offer of free cash. If I stood on a digital street corner, the uptake would be even higher.

However, fintech brokers who have deployed these same techniques have apparently failed to attract huge followings. What are they missing?

Well, what many of these platforms are failing to understand is that investing is a process, not an event. Understanding what is going on in the world or at an individual company level, reading the news, following the markets, looking at charts, reading research, talking to friends, peers or strangers to get investment ideas are all part of the process.

The last part, the buying and the selling, only represents 1% of the investment process, and is by far the least exciting part of it. Companies that make the transactional and comparatively dry element the focus of their product are missing the fundamental quality of what makes fintech such an exciting proposition – and doing wannabe investors a disservice in the process.

For me, fintech is the manifestation in the financial markets of the information revolution. Whether it’s about internet or social networks, the sharing economy and now cryptocurrencies – it’s all about empowering individuals.

With investing apps, this means giving users access to data that was formerly the reserve of the large financial institutions and teaching them to interpret how real world events can impact on the stock market.

This is excellent practice for investing, whether via a mobile app or otherwise, where those who truly profit chart a path by making their own investment decisions rather than relying on passive funds that track the major exchanges.

Ultimately, it’s about putting people in a position where they can manage their own money. The disruption we’ve seen in every other consumer sector, where the empowerment of individuals has done away with intermediaries is the real opportunity. If more companies in the fintech industry can capture that space then the impact on finance will be truly transformative.

How are banks meant to co-exist, work with or become the initiators of fast-developing fintech when most are so caught up in legacy systems? Below Finance Monthly benefits from expert insight from Kyle Ferguson, Chief Executive Officer at Fraedom, on the potential avenues banks could focus on in the pursuit of tech advancement and the maintenance of a competitive edge.

Legacy systems are seen to be the most common barrier preventing commercial banks from developing fintech applications in-house. That was a key finding of a recent survey conducted by Fraedom. The research that collected the thoughts of shareholders, middle manager and senior managers in commercial banks revealed that more than six out of ten (61%) of banks are being held back by this technological heritage.

The banking industry has historically found it difficult to make rapid technological advancements so in some cases it is unsurprising that older systems are holding them back. However, with this in mind, smaller fintech firms have already started to muscle their way in to help assist retail banks with providing a more comprehensive range of services to consumers.

Banks now have the option to negotiate the obstacle of legacy systems through partnering or outsourcing selected services to a fintech provider. Trusted fintech firms are offering banks the chance to reap the benefits from technical applications that can lead to more revenue making opportunities, without taking the large risk of banks taking the step into the unknown alone.

However, a shift does appear to be on the horizon with only 26% of commercial banks not outsourcing any services 41% of respondents globally stated that their bank currently outsources payment solutions to fintech partners. This was in comparison to 33% who say they do the same for commercial card management solutions and 26% who claim to do so for expense management solutions.

It was also interesting to note that banks are planning to ramp up their fintech investment over the next three years, with 77% of respondents in total believing that fintech investment in their bank would increase. This feeling was especially strong in the US where 82% of the sample stated this belief opposed to 72% of those based in the UK.

This transitionary period is great news for ambitious fintech firms. Banks are starting to realise that established fintech providers can make a big difference in areas of their business by providing technical expertise as well as in-depth knowledge of local markets.

It’s all about selecting key, digital-driven services that will help retain customers and entice new ones. The ability to offer card expenditure and balance transparency can reduce risk and costs for issuing banks. It is a service that can be joined on to an existing business with little overhead costs.

This is just one of several ways that partnering with fintech firms can bring substantial benefits. This increase in agility also helps banks to speed up service choices and improve customer satisfaction.

Forming a partnership can provide banks with a way around the issue of coping with legacy systems and avoid implementation costs. By forming a partnership, outsourcing banks buy in to a product roadmap that will keep their offerings ever relevant as fintechs develop the technology required.

The partnering approach is becoming more appealing to commercial banks. They understand their customers value their reliability, trustworthiness and strength of their brand. But increasingly, they also understand the importance of encouraging innovation to remain ahead of the technology curve, while recognising it is not the bread and butter of their business.

While legacy systems appear to be the most common factor in preventing banks from creating in-house fintech applications, the study did also reveal that a lack of expertise - recognised by 56% of respondents was also a major stumbling block.

To innovate and grow, banks and fintech firms alike must have employees that understand the technology – developers, systems architects and people with a record of solving problems. Taking a forward-thinking approach to recruitment is key.

If they want to attract and retain the best talent, organisations need to be listening, adapting and trusting each other to work together to resolve issues and frustrations. We believe all the above elements will become increasingly important in any successful business.

Overall, the research represents growing strength within the fintech sector and it is great to see that more banks are beginning to see the value in partnering with a fintech provider. In turn, this is delivering a better service for banks and customers alike and it is a trend that I expect to continue as banks fight to keep on the pulse of technology in the sector.

Optimism is high among SMEs across both Europe and the US, but is said optimism enough to warrant actual business expansion?

With investment in tech, especially AI, can SMEs afford to expand into new markets and regions? With tax cuts in the US, the new budget, incentives in the UK and confidence in markets all together, is optimism on the rise? Is this a year of your business expansion? What are your thoughts on the current climate, risks and opportunities?

In this week’s Your Thoughts Finance Monthly has heard from a number of top experts and businesses on their opinions and plans for expansion in 2018.

Rick Smith, Managing Director, Forbes Burton:

These days, with so many alternative funding streams available to entrepreneurs and established companies alike, it is easier than ever to get funding. However, this comes with an immediate danger and risk. How companies use this money is often the reason they run into trouble.

The tired adage of not putting all one’s eggs into one basket comes to mind, but it remains true. Diversifying, rather than concentrating on singular vision, is essential.

One thing we always advise companies to do is to think about having physical assets. Being labour-intensive and hiring equipment in the construction industry for example will only serve your growth so far. The lack of bricks and mortar or equipment assets can hit companies hard if things start to go wrong.

With so much uncertainty about, including Brexit, companies need to be mindful in order to be able to recover if things deviate.

Consider expansion of business premises or the purchase of a large, well priced piece of equipment. Ring-fencing that kind of value is wise and can be leveraged more easily. The danger in not looking for this kind of self-preservation is having to borrow more when you fall into a hole. By then it could well be too late. Growth is fantastic, but only when properly managed.”

Lewis Miller, Chief Financial Officer, Frank Recruitment Group:

When it comes to expanding your business in 2018, it isn’t a question of can you can afford to, it’s a question of can you afford not to?

Currently, the availability of cheap debt is at an all-time high; technology advancements are making it easier to invest in new capabilities and new markets, and trading internationally is becoming easier.

For these same reasons, competition is growing and getting tougher. If you are confident in your products and your capabilities, there is no time like the present to bite the bullet and invest in your expansion. If you don’t, it could be a decision you come to regret.

We are already seeing interest rates starting to rise and with strong wage rate growth being reported, this appears to be a trend set to continue. This will eventually place pressure on the economy. It’s impossible to predict the extent of which but I certainly wouldn’t rule out a recession over the next few years.

Expanding now, whilst the market dynamics are supportive will not only open up new opportunities, but the diversification will help protect your business in the event of downturn.

Having access to different markets can also give you a competitive edge with your customers as well as help attract new customers who are looking for a partner who can serve them across a wider array of offerings or geographies.

If you are looking at expanding this year into new markets, whether it be geographically or product, I would offer this one piece of advice – don’t assume that the secret sauce that has made you successful in your current market is the exact same secret sauce to enable you to succeed in new markets. You need to do your homework thoroughly across all key areas, such as; your value proposition; cultural differences in how people buy in the target market; laws and regulations; employing staff; and so on.

In SME’s, often we rely on our existing staff to drive the expansion agenda. Sometimes hiring or partnering with someone that has been there and done it in the market you are looking at, whilst costly, can be the difference in you getting it right the first time and really accelerating your growth.

Adam Schallamach, SME Growth Consultant, Business Doctors:

For a small or medium sized business, the timing of any decision to invest or expand is crucial to ensuring its continued success and, typically, owners will look at both internal and external factors before coming to any conclusions.

The external environment is confusing at the moment. For every article you find stating that business confidence is on the up, you can also find an article talking about how difficult conditions are. But, if you look through the noise, there are certain key themes at the macro level.

Despite it being 18 months since the referendum and nearly 12 months since Article 50 was triggered, we are no clearer about what the future relationship between the UK and Europe will look like. Obviously, if you are a business that relies on European interaction, this uncertainty could be crippling. But, even if you are not, the broader impacts of Brexit on the UK economy and its competitiveness, which could be positive or negative, will have an impact.

Interest rates are another key issue. As a result of inflationary pressures, the Bank of England is giving strong signals that there will be further interest rate hikes this year. These will impact the cost of borrowing and may raise pressures on finances going forward. However, interest rate rises can also have a positive impact on exchange rates altering costs for import/export businesses and supply chains.

As a consequence of Brexit, the Government is looking at how it realigns business related policies to refocus the economy. A major part of this is the Industrial Strategy which is intended to set out the broad vision going forward. Allied to this are the funding schemes/tax credits which are available and will continue to be available to assist business investment/expansion but it is clear that Government will increasingly use this tools to focus on particular areas rather than general business support.

However, whether the broader economic environment is up, down or sideways, businesses still succeed and prosper. And although there will always be exceptions, I would argue that for most small and medium businesses, the key is having a clear direction and strategy.

If a business owner knows what they want to get out of their business and has a clear alignment between that and their business objectives, that will drive what they need to do and when they need to do it. Worrying about external factors which are out of their control and even experts cannot agree on, is frankly a waste of time. So my advice is, if you do nothing else, take the time to revisit and refresh your business plan if you have one, or invest in pulling one together.

Mike Hoyle, Finance Director, Sellick Partnership:

We recognised early on that our financial year to February 2018 was going to be a big year for growth - not just for Sellick Partnership but for our clients and the wider economy.

Our temporary contractor numbers have grown steadily and the number of permanent placement has increased significantly on the year before. This reflects employers’ confidence in the market, indicating that they can afford to keep their new hires long-term.

Demand for recruitment services has increased across all sectors - including finance - and as a result, this year we are focusing on organically growing our professional services offering. We will strengthen our teams by recruiting more specialist consultants to make sure we reach our ambitious financial and operational targets for the next financial year - including surpassing £2m turnover for permanent placements.

These signs are all positive and optimism is certainly on the rise, but there still remains some uncertainty for business owners and employees alike. Although all things Brexit are definitely picking up pace, the remaining uncertainty creates risk, as businesses may struggle to properly plan for the future. With that in mind, it’s imperative that Theresa May pushes on with developments if we want a shot at further economic growth post-Brexit.

Mark O'Connell, CEO, OCO Global:

Market volatility in global equity markets in recent weeks might make you think 2018 has gotten off to a shaky start. But looking beyond this at the wider global economy, 2018 is shaping up to be a promising year for SMEs and could be the year for expansion. Last year, only just over one in ten UK SMEs exported, with businesses missing out on significant opportunities in markets outside of the UK.

2017 saw the return of a booming Europe. Key markets such as Germany, France, Italy and Spain are growing at the fastest pace in a decade and have not yet been fully explored. The German market in particular is a key prize – friendly, accessible and well-disposed to quality and strong service support. The weakness of Sterling also makes UK exporters more competitive than ever right now.

Uncertainty surrounding Brexit arrangements is also prompting many to look further afield for opportunities for growth. In the last year we have seen a significant increase in companies exploring North America. New tax friendly policies in the US have boosted small-business optimism, government-related cost pressures continue to ease and consumer spending remains strong. The US presents a supportive business climate for small firms and a wealth of opportunities.

The benefits of exporting are manifold; diversifying an export portfolio can increase both sales and business stability. A wider base of customers and distributors results in a more resilient business that is able to weather downturns in one or more markets, or offset quieter seasonal periods in one part of the world. Additionally, exporting exposes a business to new ideas and supports innovation. And one thing which UK SMEs are regularly chided for is ‘lack of ambition’: the fact is that more internationally diverse businesses achieve higher exit valuations, so don’t just fly the flag for the country- fly it for yourself.

Adrian O’Connor, Founding Director, Global Accounting Network:

There is no doubt that organisations of every size are increasingly taking a global approach to future expansion plans. It may sound like a cliché, but rapid technological advancements mean that geographic borders are not the barrier they once were - the world is getting smaller. Meanwhile, future uncertainty caused by myriad external factors, not least Brexit, is encouraging smart business leaders to explore opportunities outside of the UK. It’s no wonder that a growing number of organisations are looking to capitalise on favourable market conditions elsewhere, or simply hedge their bets against unpredictable local economies.

Recent client demand, and subsequent recruitment activity, reflects this growing thirst for international growth. The organisations we work with are increasingly seeking senior finance professionals who have experience within a global operation, are familiar with specific international tax structures or who have a solid background in analysing risk associated with global expansion strategies. Unsurprisingly, we have also witnessed job roles, and associated remits, shift in recent years to fit within business structures which are conducive to international operations.

While due diligence associated with overseas expansion expands far beyond the remit of finance teams alone, FP&A specialists who can provide detailed analysis of the strengths and opportunities of target markets - and management accountants who can advise on compensation packages based on local standards and customs - are highly sought after.

This is a strategy we have applied to our own growth plans and Global Accounting Network is expanding into the US this year. The decision was based on a similar market with a shared language and a business-friendly tax regime. International expansion is no longer a pipe-dream for the majority of business: it’s a logical next step for companies which have their ear to the ground and are looking to take their business to the next level.

Dany Rastelli, Global Marketing and Communications Manager, Elements Global Services:

2018 is the year for expansion. 2017 saw stronger growth than many had predicted and I think businesses are starting to look at their expansion timelines with greater optimism. Although companies will continue to proceed with caution in light of current geo-political events, they will no doubt look at international expansion with a view to offsetting negative growth in one market by starting to operate successfully in another.

With regards to Elements Global Services, we are certainly optimistic about what this year will hold for the company. As a global organisation we know our strengths, and are ready to put them to good use to achieve our short, medium and long term goals – no matter how ambitious they might seem. One example of our expansion plans this year, is our ambition to double our head count in the next twelve months across all offices.

It is clear that investing in tech, and more specifically AI, will be essential to a small business’ survival later down the line. In my opinion, this is a short-term (albeit costly) investment for a long-term gain that will give small businesses the competitive advantage. Companies are investing in their futures and it is widely acknowledged within the industry that automation and digitalisation will be the dominant route to market going forward. This influx of tech adoption now should see lower overheads further down the line, allowing for companies to become more profitable across a multitude of markets.

With the latest tax cuts in the US, incentives in the UK and a general confidence in the markets, I think a mood of cautious optimism has pervaded the financial markets in the last 18 months and the global economy has witnessed a positive trend developing. As a result, companies have started to look at expansion with more confidence than before. Although it is indisputable that the current economic climate is volatile, I personally believe that in every risk lies an opportunity. In 2017 the global economy far surpassed expectation and I predict that 2018 will continue this trend and allow businesses to expand and triumph in the face of both global and local adversities.

Chris McClellan, CEO, RAM Tracking:

Despite the ongoing uncertainty around Brexit, and the value of sterling, UK SMEs are still operating in a dynamic and exciting business environment where expansion is a viable option. A recent survey by American Express found that 41% of UK SMEs cite their leveraging of the particular advantages they enjoy as an SME – such as adaptability, innovation and strong customer relationships – as one of their top three strategies for fuelling revenue growth in 2018. And this optimism doesn’t cease when crossing the pond with the recent US National Federation of Independent Business survey reporting one in five SMEs looking to both hire and expand during 2018.

Back in the UK, the American Express survey also states that the majority of those surveyed cite economic uncertainty the most significant threat they face – which has switched from political uncertainty within the same poll just a year earlier. While concerns are ever-present though, this is matched with increased optimism about the opportunities that are out there to trade and form strategic alliances, both in the UK and overseas.

Indeed, developing a specific overseas strategy is a clear advantage for SMEs particularly as it provides a safety net/ pool of new customers and suppliers to fall back upon, as the UK’s departure from the EU draws ever nearer and the weaker pound becomes more attractive for overseas buyers. According to KPMG, almost half of UK exports were destined for the EU in 2017, which demonstrates the dire need to start looking at forging wider global relationships now as a safeguard.

Naturally, global expansion requires a number of obligations around tax and culture to consider but the typical make up of a successful small business – which incorporates focus, strong working/ customer relationships and consistency – helps provide the ‘front’ required to successfully move beyond our national barriers. Financing is of course, an ever-present issue – and barrier – for some, but again, by utilising the agility and innovative nature of an offering and in-house team, investment can become much easier to source. For those not quite at the stage where they can do this, perhaps 2018 is better used looking at the business and how they can make it ‘overseas expansion ready’ in order to make 2019 or 20 the year when they truly elevate.

Indicating business efficiencies is a key element of driving success within existing efforts but this also helps in demonstrating the potential for an SME to move to the next level where expansion (in the UK or indeed, overseas, is concerned). This comes down to measures like ensuring that supplier relationships are properly managed in terms of spend and consolidating requirements down to the fewest suppliers possible. However, internal measures that drill down the day-to-day costs are always needed, an example of such measures is the use of vehicle tracking devices for employees out on the road, as these are very effective and also demonstrate that employee safety and well-being is proactively being monitored.

While nothing in life that is worth getting comes easily, it does seem that the current business landscape is 'expansion-ready' where SMEs are concerned – indeed, the expected uncertainty caused by the current Brexit negotiations actually represents an opportunity for SMEs to forge new relationships that are not as dependent on exiting the EU in terms of tariffs and taxation. So, in conclusion, go forth and conquer!

We would also love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!

Martin de Heus, Head of Business Development at Onguard tells Finance Monthly the situation may get worse before new methods such as segmentation drive improvement.

The issue of late payments is often seen as a major problem for small businesses only, with large corporates cast as the ‘villains’, wielding power by holding cash owed to their suppliers. There is some truth in this assumption. According to YouGov, late payments left UK SMEs £266 million out of pocket in 2016.

However, the business world is a symbiotic environment with few real heroes and villains. The impact of late payment on small businesses is often fast and dramatic – and so more visible. YouGov research also shows that 63% of medium-sized businesses receive late payments at least once a month, compared to 40% of small businesses. According to this study, the impact of late payments in this sector can lead to reduction of innovation spend and even more worryingly, the inability to pay salaries and ultimately, redundancies.

This may be because mid-range companies are most likely to be coping with outdated IT infrastructure with limited support. As a result, they are unable to automate the entire order to cash process and apply methods of segmentation for risk assessment and to ensure customers are invoiced and sent statements by their favoured and most effective method, albeit by post, email or even SMS. This form of segmentation is already considered best practice in the Netherlands and other European companies – and there are now signs of growing popularity in the UK.

But, if in reality, the late payment scourge affects all businesses, what about the belief that it’s

specifically a UK problem? In a further study conducted a few years ago, more than 62% invoices submitted by UK firms were paid late, compared with just 40% in other European countries – so this conjecture does hold some weight.

On top of this, YouGov reports that one in ten business owners believe that the problem has become worse since Brexit – with political and economic uncertainties making firms even more reluctant to part with their money.

So, what can businesses of any size do to manage their cashflow. Here are five things that any self-respecting business should put into place now to help get those payments in more quickly

Be clear about your payment terms

If you don’t make your payment terms obvious, then you can’t really blame the purchaser for hanging on for as long as they can before paying. Make sure your team the correct terms know too. Getting them into print will make the rule more definite and remove any doubt about what is expected and give your customers a consistent message.

Reward early payers

The stick rarely works as well as the carrot – as round after round of research has proved. Incentives for ‘good behaviour’ – that is paying on time can lead to better, feel-good relationships all round.

Stagger invoices

So many companies still batch process invoices once a month. True, it’s convenient, but sending out as soon as a product or service has been delivered could bring more satisfactory results. It also means you benefit from a constant flow of money.

Come down quickly on unpaid debts

Building relationships with your client’s accounts department can pay dividends. If a payment is late get in touch straight away to help create a sense of urgency. If the two departments are on good terms nobody will want to jeopardise this and the client will want to help.

Use segmentation techniques to prioritise and minimise risk

These methods are already strong in many B2C environments where payment methods have multiplied over the past few years. Segmentation can be used to define how statements and invoices are sent and the type of debtor you are dealing with. To give a simple example – in most cases it would be unproductive to send an octogenarian a statement via social media, yet this route could be highly effective when communicating with twenty-year-olds.

Now segmentation is being used increasingly by B2B companies too. Not only can it help in choosing the most effective way of communicating with the company, but it can also help companies pinpoint the types of customers most likely not to pay on time. With this knowledge, accounts departments are aware of the risks and can focus resources on collecting these payments rather than being heavy-handed with all customers including those who always meet the deadline.

Invest in the right tools

The main barriers to automated order to cash and increasingly sophisticated segmentation are out-of-date systems or, worse still, clunky spreadsheets. Credit management software which streamlines and automates the entire order to cash process are becoming used increasingly to solve the late payment challenge, saving time and building better customer relationships. They best integrate with existing ERM and are highly configurable enabling segmentation and other data analysis for the most efficient collection of money owed.

With a brief overview of end of year 2017, Andrew Boyle, CEO at LGB & Co., introduces Finance Monthly to 2018’s potential highlights, adding some thoughts on the prospects for crypto markets, new legislation and fintech.

Last year was an eventful year for financial markets. Globally, it was characterised by a continuation of the equity bull market, strongly performing debt markets and the surge in digital currencies. We expect this year to be equally exciting yet also challenging, with key issues likely to be whether the global bull market will run out of steam, whether disruption or collaboration will be the hallmark of Fintech’s impact on financial markets and if the significant increase in regulation will yield the benefits for which regulators had planned.

It was a banner 2017 for global equity markets, with the MSCI world index gaining 22.40% and reaching an all-time high. The US equity market was boosted by robust economic growth, strong rises in corporate profits, the Fed’s measured approach to unwinding QE and, latterly the potential of a fiscal stimulus from the much-anticipated tax reform bill. In the UK last year, the robust performance of the FTSE 100, was not only boosted by the weak pound since the Brexit vote, but was led by sector-wide factors that supported housebuilders thanks to the help to buy scheme, airlines, with the demise of Monarch and miners, as commodities enjoyed price rises against a weak dollar in a strong second half of the year.

Looking ahead to 2018, the global outlook for the markets might appear challenging. Valuations appear to be full, unwinding of QE may accelerate and bond markets are already showing signs of being spooked by rising inflation. However, it’s the first time since 2008 all major economies in the world are simultaneously growing, and despite being only the second week of the New Year, $2.1 trillion has already been added to the market capitalization of global equities. Growth still looks resilient and equity markets, particularly in the US, have been supported more by innovation in technology and innovative business models. With further advances of tech stocks underpinning the market, the outlook for equities looks more positive than a focus on the actions of central banks alone would imply.

Fintech has been heralded as a major force for disruption in financial markets. Yet looking forward it would appear that collaboration might be the model. Increased interest from large financial companies backing ‘robo’ investment – such as Aviva’s acquisition of Wealthify and Worldpay’s merger with Vantiv, illustrate this trend. Given this development, regulators are taking a closer interest in the impact of Fintech, keen to ensure if they are partnering with established financial institutions that there is no systemic risk to financial markets. One example of the interest from regulators and policy bodies is European Commission’s consultation on Fintech policy, potentially due out later this month.

Another key question is whether 2018 will see the ‘coming of age’ of cryptocurrencies. Bitcoin hit £12,000 in December last year, a month after the (CFTC) permitted bitcoin futures to be traded on two major US-based exchanges, the Chicago Mercantile Exchange (CME) and the CBOE Global Markets Exchange. Alongside widespread acceptance of cryptocurrency, this year may well see the BoE invest further in technology based on blockchain in order to strengthen its cyber security and potentially overhaul how customers pay for goods and services. It appears that the blockchain could lead to a change in the very concept of money, but also that the current speculative frenzy is overblown. The total value of the cryptocurrency market is at a new high of $770bn and a recent prediction from Saxo Bank states Bitcoin could reach as high as $60,000 in 2018 before it ‘inevitably crashes’.

One final thought is the impact of MiFID II - this presented financial services firms covered by its measures with some major challenges in the first weeks of 2018. Only 11 of the EU’s 28 member states have added flagship legislation into national laws and the sheer scale of legislation has raised questions that although far reaching, it is too ambitious and full compliance will remain difficult to achieve. Yet 2018 will not give companies any respite as both GDPR and PSD2 will be implemented this year. Roll on 2019 some regulation-fatigued financial firms may say.