A sudden personal injury accident doesn't just wreak havoc on your physical well-being; it casts a long shadow over your finances. In the wake of such an event, managing skyrocketing medical bills, legal fees, and the pinch of lost income demands a tactical approach. It's about crafting resilience through informed decisions—a financial bounce-back by design.
Getting out the other side in one piece requires a deft balance between urgent needs and long-term stability. It’s a case of working out how to align immediate recovery with enduring fiscal health. Let’s discuss strategies to manage the monetary aftermath effectively, ensuring you remain financially steady on the road to recuperation.
The Floorplan of Financial Resilience
After a personal injury accident, your primary focus might organically align with physical recovery, but financial recuperation should parallel this journey. Step one: reach out to professionals. The simple fact is that personal injury lawyers, like those at Vaughan & Vaughan, can help you recover the financial compensation you deserve. Their expertise is crucial in navigating the oft-tangled web of insurance claims and legal proceedings.
But retaining legal counsel is just one facet of the recovery mosaic. A solid plan must also include inventorying expenses. Start by categorizing them—medical treatments, ongoing care costs, and day-to-day living expenses compromised by lost wages are typical culprits derailing budgets during recovery.
Envisioning a strategy that encompasses these elements allows for a comprehensive assessment of your financial situation. This provides a vantage point not only to address current fiscal demands but also to forecast potential monetary challenges ahead.
The Financial Safety Net: Maximizing Your Benefits
When the ground beneath you shifts due to a personal injury, it's paramount to explore every possible avenue to reinforce your financial safety net. This is where understanding and maximizing available benefits becomes invaluable.
Begin this leg of the journey by scrutinizing your insurance policies—health, disability, even auto, depending on the accident. Each policy may hold keys to unlocking funds that can ease the immediate pressure.
What's often overlooked is the potential relief offered by government assistance programs or employer-provided benefits. Worker’s compensation and state disability benefits may be applicable in your situation. Delve into these options promptly as they might have strict application deadlines or require detailed documentation.
So how do we ensure not a single benefit falls through the cracks? Enlist support from human resources professionals or social workers—individuals well-versed in extracting value from such programs. They'll help you weave through intricate regulations and applications, safeguarding against any missteps that could jeopardize your claim.
Cost-Control Commandments in Recovery
With your benefits secured, attention must shift to reigning in expenses—a paramount initiative for anyone amid financial recovery. Tightening the belt doesn't suggest a retreat from necessary expenditures but rather an exercise in judicious spending tailored to your current reality.
First commandment: Scrutinize and prioritize. Grasping the severity and necessity of each cost can lead to a more disciplined allotment of funds. Does this mean temporary sacrifices? Perhaps. Yet, it's essential to differentiate between short-term inconvenience and long-term detriment.
As part of this assessment, consider negotiating payment terms with healthcare providers or seeking out medical services through less expensive facilities when possible (community clinics instead of hospital visits, for example). And regarding those daily living expenses, smart budgeting now paves the road to fiscal freedom later.
But let's not overlook income—there’s potential even when recovery is a priority. Exploring passive income streams or work-from-home opportunities could soften the blow of lost wages without impeding your physical healing process. Put yourself and your health first, and these financial building blocks should fall into place.
The Last Word
When a personal injury comes knocking, financial recovery is a deliberate journey, paved with informed choices and meticulous planning. Embrace resilience through each strategy discussed—the fortification of benefits, judicious expense management, and resourceful income solutions—steering your path toward not just stability, but prosperity.
The number of people shopping in stores is predicted to drop as the cost of living continues to rise. Challenges may lie ahead for businesses both big and small across the UK, with recent research finding that 71% of SMEs view inflation as their biggest cause for concern this year.
New data from Square has also revealed a trend of “lunchflation” in the UK. Lunch item prices are rapidly increasing, with rates jumping by 3% year on year with soups leading the way, with an average mark-up of 36% as of March 2022. This is a clear indicator of recent setbacks for businesses from the past two years.
The upcoming months are likely to look as tumultuous as the start of the year, however, there are actions business owners and leaders can take to safeguard themselves against unprecedented challenges and enable continued recovery as businesses navigate the post-pandemic world. Implementing tech to streamline operations is a strong starting point and also acts as a foundation to grow and pivot a business.
Streamlining operations
Making operations more efficient should be at the top of every business owner’s to-do list, enabling employees to spend time on what really matters - building strong customer relationships, perfecting their product or service, building out their offering and creating an engaging brand story to ultimately drive sales.
By integrating technology into operations, businesses can easily boost efficiency and standardise processes across locations. We’ve purposely designed solutions such as the Square Dashboard so that businesses can track sales by employee, monitor inventory, manage timecards, accept payments and more. This way a business's entire team only needs to use and be trained on one system (and control access to certain features via employee passcodes), so everyone across multiple locations is using the same POS, which is all linked to the Dashboard.
Hospitality businesses can create seamless communication between multiple ordering channels from front to back of house. The benefits of investing in automation aren’t just felt by the restaurants, they trickle down to consumers, too. For 400 Degrees Pizzeria, a pop-up pizzeria in Cambourne, that meant giving customers the choice of how they were served, whether that be online, or in-person.
Flexibility for maximum customer reach
The pandemic accelerated e-commerce and it’s clear this shift online is here to stay. In the UK, the share of classic lunch items that were ordered in-person hasn’t returned to pre-pandemic levels, as consumers have had to pivot to placing orders online for delivery and pick-up. Despite this, a number of orders are still being placed in-person - highlighting the need for businesses to offer customers flexibility in how they order across platforms.
Going back to our previous seller example, 400 Degrees Pizzeria, is using technology to maximise orders from each end. The owner Sam Corbin told us; “I’ve been using the Square KDS, it brings together all the orders in one place no matter if they were face-to-face or online everything is just there at a glance. There are two KDS screens in the van with one at the prep side & an ‘expeditor station’ at the hatch. We mark off on our screens when it’s made and that in turn shows at the hatch - then I tap it away when it’s been collected. As we’re all able to see what’s going on clearly we can accurately predict timings for walk-ups and get orders out faster than ever.”
Whatever the next year throws at businesses, one thing is clear; those who embrace change and adopt technology will have what they need to thrive. The human-interaction element of dining and shopping will always be a huge part of the holistic brand experience, but businesses need to use the right tools to meet customers where they are, whether that’s online, in-person, or a mix of the two.
Recovery is still on the horizon
In recent years, it’s been encouraging to witness small businesses adapt and innovate not just to survive but continue growing. Many have embraced an omnichannel approach by enabling their customers to shop through their own sites, or on social media. Recent research shows that 73% of consumers are now actively shopping through social channels, showing the demand for this approach.
Staying agile and aware of the changing customer habits will enable businesses to bend and pivot. Employing the right technology early will help them to adapt fast and keep multiple revenue streams open.
The latest figures from the Monthly Insolvency Statistics report registered that company insolvencies in May 2021 was 1,011, which was 7% higher than the number registered in the same month in the previous year (946 in May 2020).
We are seeing the impact of an activist government supporting businesses across two fronts – financial support and temporary suspension of pre-existing corporate insolvency and governance legislation.
Insolvency protection extended
In a critical move the Corporate Insolvency and Governance Act 2020 (CIGA 2020), which received assent in June 2020, comprised of eight permanent and temporary measures intended to give struggling businesses a pandemic lifeline.
The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) Regulations 2021 has extended key measures in different ways:
- The suspension of liability for wrongful trading has been extended until 30 June 2021 for directors who continue to trade a company through the pandemic with uncertainty as to whether their company may avoid future insolvency.
- The prohibition on termination clauses is also extended until 30 June 2021, although small suppliers will remain exempted from obligation to supply.
- The relaxation of entry requirements into new moratorium procedure is also extended, in this instance until 30 September 2021.
- The continuation of restrictions on statutory demands and winding-up petitions until 30 June 2021.
One key measure is continuing with temporary suspension of wrongful trading, which provided company directors with much-needed breathing space. However, on a more cautionary note, they must keep in mind all sources of risk and liability under the Insolvency Act 1986 are unaffected by the Act. For example, directors are still bound by fiduciary duties and fraudulent trading provisions of Section 213, facing sanctions and penalties if they knowingly attempt to defraud company or creditors.
In addition, directors have duties under the Companies Act 2006 and must continue to act and be mindful of the interests of creditors if the likelihood of insolvency increases.
If directors are worried their business is in or expecting financial difficulty, it is crucial that they continue to consider the needs of all key stakeholders and creditors in any decision and maintain ‘good housekeeping’ in the form of board meetings and keeping records of actions taken with an assessment of the reasons for certain decisions.
What does this extension mean?
Overall, temporary suspension of wrongful trading doesn’t change the attention directors should be giving when evaluating their company’s financial position. Directors’ actions will remain subject to scrutiny, making it critical they consider very cautiously whether to continue trading if there is no realistic chance of avoiding insolvency.
The initial extension provisions in relation to filing deadlines no longer applies. The Act had granted automatic extensions for filing deadlines between 27 June 2020 and 5 April 2021 to relieve burdens on companies during the pandemic, allowing them to focus all efforts on continued trading.
Landlords and commercial tenants
The Government has also published a consultation paper seeking responses and evidence from the property industry generally as to how negotiations between commercial landlords and tenants on rescheduling rent liabilities have been handled during lockdown.
The protective measures the Government introduced back in April 2020 were only ever meant to be temporary. This was a lifeline for many but now there is a significant risk for those who relied on this during the pandemic that once those protections are lifted – scheduled for June 2021 - businesses may fail when rent arrears are pursued.
It is hard to envisage the government allowing a cliff edge to come into view when it has spent so long over the past year seeking to protect embattled businesses.
Post-lockdown outlook
Although easing of lockdown measures is accelerating and businesses are beginning to open, numerous challenges lay ahead, particularly with expected long-term reduction in consumer demand and confidence. Many company directors will likely face challenging decisions whether to continue trading or instigate insolvency processes soon.
There is also pent-up private equity demand and high levels of debt funding. This desire to deploy capital, combined with what we could term a ‘flight to quality’, mixed the optimism as a result of the vaccine programme, as well as near-record levels of corporate liquidity and a strong market for M&A, we could well see a positive market.
If directors are worried their business is in or expecting financial difficulty, it is crucial that they continue to consider the needs of all key stakeholders and creditors in any decision and maintain ‘good housekeeping’ in the form of board meetings and keeping records of actions taken with an assessment of the reasons for certain decisions. Where possible, they should also seek appropriate professional advice.
Tim Wakeford, VP for Financials Product Strategy at Workday, offers his insight to CFOs looking to lead their business back to strength.
After a year where organisations were forced to continuously change plans and rethink their approach to business recovery, the future is finally looking less turbulent, with a potential COVID-19 vaccine on the way. One fundamental transformation 2020 brought to businesses, however, will continue informing the next year. Leaders will be looking to the CFO for insights on the business and guidance to decide their next move.
If the early stages of the pandemic have taught us anything, it is that companies need good quality data to make faster decisions. The question is, what data-driven insights do CFOs have to provide companies to deliver the best response to persistent change?
It could be argued that all data is valuable. Nonetheless, CFOs must focus on three particular data-led insights to steer businesses to recovery. They need to provide visibility into working capital, empower other leaders with data, and manage investor expectations with scenario planning. In doing so, they will be in a strong position for success in 2021 and be able to guide the business through any challenges the future may bring.
Gain greater visibility into working capital
The first priority all CFOs have in common is being able to share real-time visibility over their business’ financial inflows and outflows in order to manage cash pressures. This is because many businesses have seen revenues plunge during the pandemic, which had a negative impact on cash flow. In fact, 94% of the Fortune 1000 are seeing coronavirus supply chain disruptions and facing the reality that they will need to become more agile in managing inventory. The disruption of the second wave is heightening financial pressures and will likely mean that CFOs have to reassess their budgets again and again. Without a real time view of working capital, moments of disruption can lead executives to make decisions in a panic. This could result in significant inventory spend with non-preferential suppliers, which in turn reduces the potential for savings from contractual discounts, and is common during turbulent times. Having a 360-degree view of the organisation’s working capital, however, can provide a better handle on spend management, optimising costs and overall efficiency. This will help leaders avoid risks that can set them back, and help them to accelerate recovery.
The first priority all CFOs have in common is being able to share real-time visibility over their business’ financial inflows and outflows in order to manage cash pressures.
Empower the organisation to make data-driven decisions
Getting the right data-led insights into the business to guide decisions can be challenging during a constant state of change. However data-driven insights are absolutely key in empowering decision-making — even during the best of times. Providing the right data, to the right people at the right time, can only be done by breaking down the data silos still present in many companies. A global Workday study revealed that out-of-date information and siloed teams are the biggest barriers to agile decision making. On the other hand, 80% of technology leaders from more agile companies stated that employees have access to timely and relevant data without gatekeepers blocking access to such information.
The challenge is that, as many businesses have grown and evolved they have accumulated different technologies — systems that are often placed together and lack smooth integration or a single pane view of what is happening in the organisation. CFOs whose businesses have reporting scattered across different data sources will find that it is much slower and harder to monitor performance, identify variances, and surface risk. This is why CFOs and finance teams have to consider investing in overhauling their technology stacks. Our customer Equiniti, for example, found that having all HR and financial data in the same cloud helped identify challenges and respective solutions with much more agility and confidence during the pandemic. This way, they were able to fix gaps quicker, without slowing their recovery plans.
Manage investor expectations with scenario planning
The uncertainty and volatility created by the pandemic has led to markets swinging back and forth. In turn, this creates pressure from investor communities and has served to highlight one of the biggest challenges organisations face — determining the long-term future of a business. In the current state of constant change, CFOs and their teams cannot underestimate the importance of taking a strategic approach to investor relations. Besides sharing earnings reports, it’s the CFO and its team’s role to offer constant reassurance to stakeholders by communicating how management teams are dealing with the crisis.
Therefore, when talking to investors, leaders have three choices: withdraw, revise, or reaffirm guidance. A recent Deloitte report revealed that more than half of CFOs from public companies have chosen to withdraw from providing guidance. Although understandable, this could signal that leaders are unsure of their company’s prospects and have a downward impact on stocks.
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When faced with this lack of clarity, finance leaders must stay ahead of the curve and give invaluable insights to investors by undertaking scenario planning. Many of our customers are basing their entire recovery plans on multiple pictures of their budget using what-if scenarios, and it’s proven equally important for investor insights. CFOs can build scenarios to better understand what the future may look like in areas of particular interest to investors, such as covenants. Deploying these types of forward-looking processes will help businesses prove their stability, ensuring sustained recovery and emphasising their long-term objectives with clear metrics.
The strategic role of the CFO for business recovery
The pandemic has shifted the role of the financial office for good. Everyone – from HR and commercial teams to investors – are now looking to the CFO for guidance and to spearhead the business through upcoming disruption. Armed with the right insights, plans and tools, the CFO will be able to lead their organisation to a swift recovery and prepare the business to thrive, whatever the future holds.
The worst of the COVID impact on the major economies does seem to be over. Many of the economic activity indicators point to a V-shaped recovery from the slump in output and consumer spending back in March and April. Indeed, equity markets responded to the swift and unprecedented global and monetary stimulus at the time by quickly moving out of bear market territory with US equity markets going on to make new highs in early September before making a sudden 10-12% correction. US tech stocks are very over-valued and a ‘dot-com2’ cannot be ruled out. A stock market crash and bursting of the ‘Everything Bubble’ would come at a very unfortunate time. Otherwise, you will recall that early on in the pandemic, economists went through letters of the alphabet in trying to determine the shape of the prospective economic recovery. Optimists went for V; two-handed economists went for W and pessimists went for an L. The optimists have been right so far.
However, in these uncertain times, it is not difficult to come up with a long list of reasons to join the pessimists. These include the threat of fresh lockdowns in response to rising COVID infections through a more muted increase in the fatality rate. The advice to governments must be to avoid widespread lockdowns and to make sure that we do not end up in a disastrous economic slump. Unemployment still remains high and there may well be further job losses post-COVID as employers cut headcounts and understand that during the lockdown, they could operate their businesses in most part with a more productive workforce. Unfortunately, it is those people that don’t work in an office and can’t work from home that have been the most affected by the COVID-recession. The pandemic has also worked as an accelerator of ‘disruptive’ technologies as well as potential changes in working practices, though it will be interesting to see whether there is push-back from ‘working at home’.
Other uncertainties include the outcome of the 3rd November US Presidential Election. The opinion polls and betting odds (see electionbettingodds.com) point to Joe Biden winning the White House with a relatively high probability of the Democrats winning a ‘clean sweep’ of the House and the Senate. A key feature of Democrat economic policy is to overturn the President’s tax policies, in particular, an increase in the US corporate tax rate to 28% and the imposition of a wealth tax. More likely is a badly needed infrastructure program that can support growth and jobs.
Central banks won’t admit it, but their actions are what used to be called debt monetisation. Welcome to the world of MMT (Modern Monetary Theory or the Magic Money Tree, take your pick).
However, in the current economic environment, tax increases may end up being deferred. The US economy needs to secure a sustainable recovery and policymakers should not make the mistake of implementing a fiscal squeeze even though US fiscal settings are regarded by the independent Congressional Budget Office (CBO) as being ‘unsustainable’. The same advice applies to other governments. Fiscal ‘austerity’ is exactly that and delivers economic ‘austerity’. The Eurozone is a classic case of wrong economic policies where the recovery is already faltering and where the Eurozone is experiencing mild deflation despite ‘excess liquidity’ from the European Central Bank (ECB) amounting to €3 trillion, a doubling in a period of only 6 months, and an ECB balance sheet that has exploded to above 50% of GDP (compared to nearly 35% for America’s Federal Reserve). Much fanfare greeted the EU’s Recovery Fund back in July but most of the measures do not come into effect until next year thus mitigating any direct fiscal impact on growth. The Eurozone is turning ‘Japanese’ and looks as though it is stuck in a liquidity and debt trap. No wonder that the Stoxx600 Bank share index just recently made a record low. That is mostly thanks to the effect of negative interest rates which are deadly for bank profitability as well as denting savings which are an important fuel for providing investment. Which brings us to Brexit and the ‘deal’ or ‘no deal’. Unless you are a remainer and a firm believer in the worst prognostications of ‘Project Fear 2’, you could not be blamed for thinking that it is the Eurozone that is the loser from Brexit and a ‘no-deal’ scenario. A ‘deal’ only works, as in life, if the deal is mutually beneficial and not coercive. At the time of writing, the odds of a deal characterised by zero tariffs and zero quotas is about 50-50. For what it is worth, I favour Brexit both from a political and economic perspective and see the prospect of favourable opportunities globally going forward.
Back to the US. The cost of the recession and the various fiscal programs enacted so far are likely to show up in a US budget deficit in this fiscal year that amounts to 16% of GDP with US federal deficit hitting 100% of GDP. The CBO warn that on existing policy trend that the federal debt could end up being nearly 200% of GDP by 2050. Of course, if this is not sustainable, it won’t be. The history of US fiscal policy shows that actually it is Democrat Administrations that end up reversing Republican fiscal profligacy.
More interesting is what the Fed does. Monetary policy entered the so-called ‘uncharted territory’ some time ago. Zero-interest rates, negative rates, QE are now all a matter of course. Central bank independence has become an illusion and central banks have become funders of Treasury debt issuance. Central banks won’t admit it, but their actions are what used to be called debt monetisation. Welcome to the world of MMT (Modern Monetary Theory or the Magic Money Tree, take your pick). With global debt-GDP at a record high, the risk is that policymakers covertly rely on an increase in inflation to reduce the real value of debt. At the moment, the major government bond markets think that there will be no inflation. The increase in the gold price suggests that some investors think otherwise. Bond yields are still near historic lows and market-based measures of longer-term inflation expectations remain subdued. The US dollar has not collapsed though the emergence of the ‘twin deficits’ is a currency-negative for the longer term.
In the meantime, it is back to China. So far so good. The economy is recovering, admittedly propelled by significant credit expansion and some measures to promote infrastructure spending. Exports are starting to recover which is good for the Asian region, and the Chinese currency has appreciated thus helping the export competitiveness of its Asian trading partners. There are risks with Chinese corporate debt especially in the real estate sector, but the central bank has big pockets. Relations with the US still remain tense and President Trump’s trade dispute with China has not been to America’s trade disadvantage as the trade gap with China has not improved. A win for President Trump in the election cannot be ruled out given previous unreliability of the opinion polls, and fresh tensions with China could easily emerge. Some geopolitical experts warn that there are other risks related to the relationship between China and Taiwan for example. The shape of the global economy and shape of the international financial system has changed and will continue to change, but it is the US and China that will determine the pace of such changes.
The UK is on course for a V-shaped recovery from the damage wrought by the COVID-19 pandemic, according to the chief economist of the Bank of England (BoE), Andy Haldane, has estimated.
In an online speech on Tuesday, Haldane acknowledged the continued risk of high and persistent unemployment across the country, but “[his] reading of the evidence is so far, so V.”
Haldane, who was the only member of the BoE’s Monetary Policy Committee to vote against the expansion of its government bond-buying programme earlier this month, said that business surveys have indicated an economic recovery that will come “sooner and faster than any other mainstream macroeconomic forecaster” has thus far predicted.
Regarding his reluctance to see the bank inject another £100 billion into the UK economy, he noted a risk of creating a “dependency culture” where the country’s financial markets would become accustomed to the bank addressing all economic problems with cash solutions.
Despite his vote against expanding the bank’s asset purchase programme, Haldane voted along with the other eight members of the Monetary Policy Committee to keep interest rates at a record low of 0.1%. In his Tuesday webinar, he declined to comment on whether or not a negative interest rate was being considered.
A review on the subject would not be complete until “well into the second half of the year”, he said.
Tim Wakeford, VP of Product Strategy at Workday, outlines the benefits of agile financial planning and the research backing it.
It’s hard to be certain how long the economic impact of the COVID-19 pandemic will last. Recent predictions estimate 2025 as the finish line for recovery, but this isn’t the first and won’t be the last forecast we see. However, as we adapt our strategies to recover, one thing remains clear: COVID-19 will have a lasting impact on how businesses make plans worldwide. I’ve been talking to many customers to understand what they’ve been doing to weather the storm and what they’ve valued the most is having the agility to respond quickly to changes.
Agility to gain business resilience
Being agile when faced with change has always been a defining characteristic of companies that respond well to competitive threats. A Workday study on organisational agility showed that top-performing companies were ten times more likely to react quickly to market shifts, proving that agility is often a synonym for performance. During the pandemic, agility has emerged as the defining attribute of organisations which are responding well to the current crisis. Moving forward, it will be the essential tool to draw a much needed resilient course for growth.
To build agility into an organisation, processes need to be transformed. Finance sits at the heart of this transformation, simply because it touches every aspect of a business. The finance department is responsible for the budgeting and forecasting of activities — all essential planning processes that will map recovery. Three out of four finance executives admit their planning processes have not prepared them for economic disruption, let alone a global pandemic. They have found the key to respond better to this and any future crises in adopting three agile processes: scenario planning, continuous planning and rolling forecasts.
To build agility into an organisation, processes need to be transformed.
Scenario planning to anticipate impacts
From the moment companies started to send employees home and supply chains were interrupted, the future became more uncertain and organisations were forced to ask themselves “what if?”. What if our workforce has to work from home for the rest of the year? What if our supply chain is interrupted for 60 days? With tools that provide the ability to build-out scenarios, businesses can ask these questions and understand what different versions of their future might look like. With roadmaps laid out, they’re able to not only identify future risk but also look for new opportunities. During the first months of the pandemic, we’ve seen organisations create up to 30 times more build-out scenarios than usual in our platform. The value of this strategy has been proven beyond financial planning: Oxford University, for instance, has an approach to scenario planning used by scientists and policymakers when facing situations of global impact.
As we move towards recovery, the future is just as unclear. A recent survey conducted by Deloitte showed that 89% of CFOs now feel there is a high or very high level of uncertainty facing their business. The more finance teams apply technology to model different future scenarios, the better prepared and more confident they will be to quickly adapt their strategy to these uncertain outcomes. Planning based on assumptions is better than not planning enough, and technology can make this process seamless without weighing on anyone’s time. One of our retail customers, for example, is planning their recovery by using multiple pictures of their budget based on different assumptions, all sitting in the cloud platform, to avoid any version control issues that offline spreadsheets can bring up.
Continuous planning to avoid obsolete budgets
A survey conducted by the Association for Financial Professionals in 2019 revealed that the average annual budget takes 77 days to be prepared. Think back to where the world was 77 days ago to understand that this is simply not a sustainable process. Forward-thinking businesses no longer approach financial planning as a one-time annual or quarterly event. Episodic planning quickly becomes obsolete and wastes valuable time.
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By deploying a continuous active approach to planning, leaders are able to quickly adjust budgets adapting to any shift in the marketplace or change in the organisation — something fundamental in the current scenario. We have found that companies that implement continuous planning are 1.5 times more likely to be able to reforecast within just one week, a level of agility that helps businesses avoid budget freezes.
Rolling forecasts to roll with the punches
Rolling forecasts are just as important in the toolkit of agile finance planning. They are a strategic way to approach forecasts because they are guided by key business drivers. We’ve found from our customers that they can help accurately predict changes from four to eight quarters in advance. By being able to visualise a consistent horizon, finance leaders gain the confidence to make critical decisions. In addition, the rolling aspect of the forecasts offers an invaluable way to course-correct quickly.
To survive a time of escalating uncertainty, agility is a safe harbour for any organisation. By deploying continuous planning based on build-out scenarios and rolling forecasts throughout the recovery, leaders will be better equipped to make forward-looking decisions, and not only recover but do it with a competitive advantage. Ultimately, the changes in planning processes implemented during this crisis will prepare businesses for any future storms they might face.
The Greek Debt Crisis was one of the more recent economic disasters that required three bailouts. While Greece is far from out of the woods, here's a brief history lesson on what happened.
Bitcoin will lose 50% of its cryptocurrency market share to Ethereum within five years, states an influential tech expert and business analyst.
The comments from Ian Mcloed, from Thomas Crown Art, the world’s leading art-tech agency that he established with renowned art dealer, Stephen Howes, comes as Ethereum, the world’s second-largest cryptocurrency by market cap, began a price recovery on Friday after being hit hard with a major sell-off in recent weeks.
Bitcoin – the biggest digital currency – had also been in decline, but it bounced back quicker than its nearest competitor.
Indeed, Ethereum had crashed 85% overall this year.
However, Ethereum is regained ground late last week, jumping almost 14 per cent after its most recent plunge, only find itself trading again 10 per cent lower once more in the past 24 hours.
What is happening? And what does the future hold for Ethereum?
Mr Mcloed observes: “Turbulence is a regular, and sometimes welcome, feature of the crypto sector. Therefore, the Ethereum rebound was, and is, inevitable.
“But not only do we think it will rebound considerably before the end of 2018, I believe that over the longer time it will significantly dent Bitcoin’s dominance.
“In fact, I think we can expect Bitcoin to lose 50 per cent of its cryptocurrency market share to Ethereum, its nearest rival, within five years.”
Why is he so confident?
“Simply, Ethereum offers more uses and solutions than Bitcoin, and it’s backed with superior blockchain technology,” says Mr Mcloed.
“This is why we use Ethereum’s blockchain in our art business. It has allowed us to create a system to use artworks as a literal store of value; it becomes a cryptocurrency wallet.
“It also solves authenticity and provenance issues – essential in the world of art. All our works of art are logged on the Ethereum’s blockchain with a unique ‘smART’ contract.”
Last month, Stephen Howes explained: “Using this cutting-edge technology, the art world can eradicate one of its biggest and most expensive problems – forgery – and can protect artists, galleries, and private owners and collectors.”
Ian Mcloed concludes: “Whilst there will continue to be peaks and troughs in the wider cryptocurrency market, due to its inherent strong core values, Ethereum will steadily increase in value in the next few years and beyond.
“Unless Bitcoin does more now to tackle scalability issues, and improves the technology it runs on, we cannot see how it can catch up with Ethereum over the next five years or so, when the crypto market will be even more mainstream.
“Ethereum is already light years ahead of Bitcoin in everything but price – and this gap will become increasingly apparent as more and more investors jump into crypto.”
(Source: Thomas Crown Art)
To find out more about insolvency and restructuring proceedings in the UK, Finance Monthly reached out to one more professional operating within the sector. Garry Lock is a partner with Quantuma - a leading restructuring and insolvency practice, delivering partner-led solutions to businesses and individuals facing financial distress, with offices in London, Southampton, Marlow, Watford, Brighton and Bristol.
As a professional whose practice spans sectors from retail to recruitment, what are the sectors that experience insolvency and restructuring proceedings more than others in the UK?
Those sectors that would experience the highest number of failures would be those with low barriers to entry and low, or no regulation. Businesses which have a high-fixed cost base and rely upon high-volume and low-margin sales also struggle when the economy is unstable. An example would be a retail chain of shops or restaurants.
Construction always has a moderate level of failure because contractors often have to fund projects for considerable periods of times, whereby the profit element is typically not earned until the project is completed. Project holdups, not always the fault of the contractor, can create a cash flow crisis or, in a worst case scenario, the failure of a company.
An understanding and appreciation of the working capital cycle for a business, as well as having a sufficient working capital base to support the turnover, is key. The significance of understanding margins, costings and break-even are often overlooked.
Sectors that also experience high-failure rates often struggle with an overview of the company finances to the point where decisions are made, which decisions tend to be more reactive than proactive. Smaller business in particular often don’t survive a bad trading year.
The continuing recovery in the UK economy has resulted in corporate insolvency falling down steadily in 2015– how have these trends impacted your practice over the past twelve months?
Quantuma was set up in early 2013 by industry veteran Carl Jackson. In the last 4 years the firm has grown to a 12-partner firm, employing over 100 staff in 6 offices. Our firm has grown when other firms have cut their restructuring teams. Quantuma was ranked in the national top 10, for number of formal appointments during the calendar year 2016. The firm has managed to grow market share in a declining market through its good connections and the hard work of the partners and staff.
Market conditions are very challenging, so with declining numbers of formal appointments you have to adapt your approach and also deliver an excellent service when the opportunity arises. Reputation is very important.
The partners in the firm have a good referrer base, which means that we engage with a wide range of stakeholders and retain a high level of input into the work that is carried out.
The firm has a strong management structure which enables flexibility to make decision and to act quickly when opportunities arise. Maintaining regular contact and an open dialogue with those who refer work to you is vital.
What are the typical issues that you face when conducting investigations on corporate and personal insolvencies?
Investigations in insolvency proceedings are carried out for a number of reasons. Primarily, the purposes in both corporate and personal insolvencies is to identify and recover assets for the benefit of creditors. In addition, there are instances where insolvencies give rise to claims that can be pursued by insolvency practitioners where there has been wrongdoing. These claims are covered by both the Insolvency Act 1986 and the Companies Act 2006.
For corporate insolvencies, the actions of the directors in the period after the company became insolvent will also come under close scrutiny to establish whether they have acted in a way that has either enriched themselves or prejudiced the interests of creditors individually or collectively.
Investigating personal insolvencies is generally more challenging than for corporates. This is largely due to the lack of an audit trail for the affairs of an individual, which is often present, in one form or another, for a corporate.
Albeit it is a criminal offence if an individual fails to deliver up a full account of their affairs to the Official Receiver at the outset of a bankruptcy, there are often occasions where full disclosure has not been made. The insolvency practitioner will need to build up a picture of the person’s affairs either with, or sometimes without, the cooperation of the individual.
Not all individuals are fully cooperative with the proceedings, particularly if you are contemplating bringing proceedings for the recovery of assets they might have transferred to third parties before they were made bankrupt. There are sanctions available to deal with instances of a lack of cooperation with the use of court proceedings for interviews and the option to suspend the individual’s automatic discharge from bankruptcy proceedings being available. This does not however always achieve the desired outcome and some individuals can remain bankrupt for many years until they decide to cooperate.
The extent of any investigation will largely be determined by the level of the insolvency, the type of claims against the individual and also representations made by those creditors. If the information and representations provided by the directors or individual are considered reasonable, then investigations may be little more than routine searches. Conversely, if it is clear that the position as a whole just doesn’t stack up then it may lead to follow up detailed investigations which may include reconstructing accounts from incomplete company records, applications to court to deliver up information or even oral examinations.
Corporate investigations tend to have trail to follow and the starting point is a review of the statement of affairs of the company provided by the directors, and then comparing it to the last filed statutory accounts. This helps to assess what happened in the final period of trading and whether it supports the directors’ version of events.
Further review of the company’s books and records, back-ups of electronic data, information obtained from professional advisors and also representations made by the company’s management and its creditors should provide most of the answers. It is rarely the case that the company’s records are up-to-date and complete at the point of insolvency. We also consider whether management have any other entities trading that might suggest the company’s assets, both tangible and intangible, have been transferred.
With all corporate insolvencies, the key aspect is to establish when the company became insolvent and what happened in the period from that point through to the company entering an insolvency process. There are two tests to establishing insolvency. The first is the cash flow test, which is the point at which the company could not pay its debts as and when they fall due. The second test is the balance sheet test. The point at which the company’s liabilities exceeded the value of its assets. Proving insolvency can sometimes be problematic but there will often be information available to be able to pin point an approximate date.
The next stage is determining what happened from that date through to the date of the insolvency. In essence, did management recognise that the company was insolvent and can we establish what steps were taken by management to address the decline. If no proactive steps were taken, the directors may well be liable but in all instances the evidence has to be clear and presented in a format that can be put before a court if an agreement cannot be reached on settlement.
Creditors’ expectations can be unrealistic and have a tendency to focus on self-interest. Managing those expectations at the outset can also influence the level of investigation work carried out. For larger assignments the formation of a creditors committee can be useful for the purposes of assisting with the understanding of the affairs of corporates.
With any investigation there has to be an element of proportionality and so a cost benefit analysis is always required. The insolvency practitioner has to consider whether detailed work will ultimately lead to a recovery for the benefit of the company’s creditors taking into consideration the costs that may arise from a recovery action by legal process which is always costly and risky. Furthermore by the very nature of the matter there may not be funds available initially to cover detailed investigation work so the insolvency practitioner needs to weigh up the risk of not being paid.
What are the most common tactics that you implement when assisting distressed corporations with restructuring?
Firstly you need to understand how much time you have to implement changes. Where time is short and directors have left it too long, to the point that creditors are threatening winding up, then an insolvency process may be necessary whereby the process is a precursor to restructuring the business operations.
Where circumstances are not quite so critical and you have more time, you need to assess how restructuring will be most effective and so a business review of current operations should be carried out. The level of detail of the review will depend upon the size and complexity of the company’s operations as well as the extent of the company’s current losses. The business review will cover an assessment of the past and current financial performance as well as an overview of the operational aspects of the business. It may also cover the strengths and weaknesses of existing management. The review will highlight the aspects of the business that are both good and bad, and will aid the formation of a number of strategies that should assist turnaround.
Typically the initial focus will be trying to return the company to profitability in the shortest possible time frame.
An assessment of how that will be achieved will be quantified in the business review following which a cost reduction programme and efficiency drive will be implemented. This is likely to include rationalisation of the workforce, as well as a review of the remuneration policy for management which may not be in keeping with financial performance. Those assets that, after review, are considered to be non-performing will be sold.
Sometimes less means more. Often management become obsessed with ever increasing turnover at the expense of profitability and so cutting high volume, low margin products can result in considerable cost savings and increased profitability. Pricing will also need to be assessed.
Over time management can lose focus. Furthermore, corporate governance is often lacking with distressed companies. A refocus of corporate strategy, financial budgets, cash flow projections and key performance indicators will be necessary to understand what is realistic in the short and medium term.
What is the likelihood of insolvency and restructuring processes that cannot save a company and what are the circumstances that typically lead to liquidation? How common are Company Voluntary Arrangements, Creditors Voluntary Liquidations and Members Voluntary Liquidations and how do you assist with them?
For any restructuring process you need the support of the stakeholders of the business, whether that be management, employees, banks, funders, customers and suppliers to effect change. Sometime despite best efforts of management and their advisors, external factors can undermine the restructuring process. An example of this would be the loss of a major contract or key members of staff, high exit costs of an unprofitable contract. These situations can make the company’s operations not financially viable whereby the only option will be to liquidate the company.
Company voluntary arrangements are a useful process where a company may have experienced a one off event such as a significant loss on a contract or a bad debt. Again viability is key to whether it is the correct procedure and also whether there is sufficient working capital to keep trading. There are also other factors to consider because a CVA can last up to 5 years. During that time the company’s credit rating will be recorded as poor meaning that it will have a knock on effect to securing new contracts.
Creditors Voluntary Liquidations form the majority of work for insolvency firms. The process appropriate for directors to wind up failing companies before it reaches a stage of creditors taking their own enforcement action with winding up petitions.
Members voluntary liquidations (MVL’s) apply to solvent companies and are a tax efficient way of winding up a company that has reached the end of its useful life and has surplus capital to return to shareholders. Where the company is not part of a group, by using this process, it gives rise to lower tax for the shareholders and also the option, should the criteria be met, to claim Entrepreneur’s Relief. For group companies the MVL process can end unnecessary administration of maintaining compliance.
The MVL process is very common. With most instructions of this nature timing is very important, particularly with owner managed businesses.
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Ben Rhodes is a Director at Grant Thornton, Channel Islands. He is a Chartered Accountant, UK Licensed Insolvency Practitioner, Certified Fraud Examiner and qualified Trust and Estates Practitioner. He has specialised in the areas of restructuring, insolvency and forensic investigations since 2003, helping company directors, creditors and other stakeholders. He began his career in London before moving to the Channel Islands in 2012.
Grant Thornton has the largest single dedicated recovery and reorganisation practice in the Channel Islands, with three UK Licensed Insolvency Practitioners supported by a team of experienced accountants and fraud examiners. Here Ben tells Finance Monthly more about the insolvency and restructuring processes in the Channel Islands and specifically Guernsey, as well as what makes him a thought leader in the sector.
What are currently the hottest topics being discussed in relation to insolvency and restructuring trends in the Channel Islands?
The concept of “Insolvent Trusts” has gained much attention in the Channel Islands in the last couple of years and remains a hot topic now.
It is debatable whether a Trust can become “insolvent”, as it does not have its own separate legal personality. However, a Jersey ruling in 2015 in Re Z Trust has helped provide clarification. This matter concerned a Trust that had insufficient assets to meet its liabilities, as they fell due and was therefore insolvent on a cash-flow basis. The Court recognised that it was incorrect to describe the Trust as “insolvent”, however acknowledged that the terminology was helpful in ascertaining how the Trust should be treated and the duties of the Trustee.
The Z Trust ruling is helpful, however there remain problems to be overcome. There is no insolvency regime in place in respect of Trusts and therefore, no clear remedy for creditors and other stakeholders. This lack of regime results in additional cost. Furthermore, there is difficulty finding a replacement for the incumbent Trustee in these situations.
Which sectors would you say are faced with insolvency and restructuring proceedings more than others in Guernsey?
As expected of an International Finance Centre, we deal with a significant volume of solvent restructuring matters in relation to Trust and Fund structures in Guernsey. These structures have typically come to the end of their useful life and are therefore being wound down. The structures often include entities in various jurisdictions such as Luxembourg, Cayman, BVI and Bahamas, as well as the UK and therefore, we work closely with our international Grant Thornton colleagues. We also work very closely with our tax colleagues in relation to these matters as decisions are often driven by tax considerations.
Do you see any need for legislative change regarding insolvency in Guernsey?
Guernsey is currently embarking on a reform of its commercial and personal insolvency legislation. I was engaged in 2016 by the States of Guernsey to assist with the changes and to provide recommendations on the proposed law reform.
The first phase of the reform is anticipated to include the introduction of insolvency rules; a requirement for independent office holders in an insolvent voluntary winding up; greater consultation with creditors in an insolvent winding up; and greater powers for office holders to obtain information from directors and officers.
These changes will make the insolvency regime far more robust and will enhance Guernsey’s reputation as a safe place to do business.
You have worked on numerous high profile cases in the Channel Islands and the UK - what has been your flagship piece of work in recent years and how did you apply particular thought leadership to this scenario? (94)
We continue to be busy with regulatory and insolvency investigations in the Channel Islands. Our clients may include Trust or underlying entities that have been the victim of fraud; or beneficiaries and investors seeking compensation.
Our forensic investigation work may include isolating and quantifying the fraud, interviewing suspects and witnesses, gathering and preserving digital and other evidence and working with the legal teams to pursue prosecution.
Our in-house Business Advisory and Compliance teams also assist clients with putting processes and safeguards in place to reduce the risk of fraud occurring in the first place.
As a thought leader in this segment, how are you developing new strategies and ways to help your clients?
As a member of the Association of Restructuring and Insolvency Experts (ARIES) Legal and Regulatory Committee, I have been assisting with the implementation of Guernsey Insolvency Practice Statements (GIPS). These will help to provide best practice guidance to practitioners in Guernsey, in advance of the law reform. The GIPS will cover such practical areas as conducting investigations, reporting on director conduct, the holding of creditors’ meetings and pre-packaged sales of business through Administration.
The GIPS are expected to be released within the following two months. ARIES has also begun drafting Jersey Insolvency Practice Statements (JIPS) to offer similar guidance to Jersey practitioners.
