Key statistics from both reports include:

• 97% of consumers now make monthly retail purchases online.

• Half of UK stores now offer same-day in-store pick-up.

• 73% of consumers have bought products directly from social media in the past month, and 35% would be interested in a virtual reality (VR) shopping experience.

• 98% of restaurants have had to reorganise their business in order to survive the past 12 months.

• One in four consumers consider contactless technology to be critical to their dining experience.

• 91% of restaurants expect to earn revenue from takeaways in the next twelve months; while one in five expects the majority of sales to come from delivery and takeout sales.

Following the launch of these reports, Finance Monthly speaks to Justin Carty, owner and director of Square seller Coffi Co about the pandemic, the evolution of Coffi Co over the past 18 months, and the company’s goals for the next five years. 

Throughout the peak of the pandemic, what were the toughest challenges that Coffi Co faced?

The last 18 months has presented unprecedented challenges to businesses of all sizes. For Coffi Co, one of our most difficult challenges was adapting to changing regulations to ensure we could keep our employees and customers safe, while still remaining open. 

In a month’s time, we went from implementing social distancing, to closing up all of our shops. From there we totally changed our business and how we operate. We set up a home delivery service, click-and-collect offering and built a Coffi Co app to make it easy for customers to get their Coffi Co favourites, in a way that suits them best. 

This month brought about an incredible amount of change, but having the right platforms in place ensured we could transition from in-store only to click and collect and home delivery quickly, which was essential to our business. For us, Square was invaluable in helping our business transition during this time of incredible change - enabling us to stay open and continue serving our local community in Cardiff. 

How has your business evolved over the last 18 months?

How we operate as a business has wholly changed over the last 18 months. A year and a half ago, all orders would have been made directly at our shops in Cardiff, but now we only use our order-ahead app. It is simple to register your details and once you’ve signed up the ordering system is simple and easy to use. The response from the app is so positive that all business activity is now driven by Square and their order-ahead app. It’s reliable, very efficient, and has allowed us to continue trading during one of the most unpredictable years to date.

Having the right technology in place has enabled Coffi Co to adapt to changing regulations, implement new offerings and even open new locations, all while adhering to government guidelines to keep both staff and customers safe. One of our main challenges was not having the right tools to manage queues until we found Square. We were a modern operation surrounded by payment systems providers that were stuck in a different decade. Due to the scale of our business, we required a bespoke solution - and have implemented Square for Restaurants POS, which we use alongside Square KDS, Square Terminal and Square Stand. 

Square was able to understand our needs and work to deliver a tailored solution for us, helping to ease the pressure on staff serving queues at the till, so they could focus on other parts of the business. We can now utilise these staff members to run our stores in the day to day operation.

Choosing the right technology has set our business up for growth and success. In the last year we have opened a new seafront location in Penarth and also a Gin and Bake lunch offering, to provide food and drink to our Cardiff community. While the last 18 months have been incredibly challenging for Coffi Co, it also has provided us with the opportunity to evolve and grow in entirely new ways.

What are your goals for the coming years?

At Coffi Co, our ambition has always been to provide the best dining and drink experience for those visiting us in Cardiff. In the next few years, we hope to expand our offerings even further - as now we offer venue hire, and we’re breaking new ground, as we’ve recently opened No. 73 by Coffi Co, luxury rooms and suites for those visiting the city. 

On top of growing our business, we’re committed to continually giving back to our community. During lockdown, we provided free coffees and meals to NHS and frontline medical workers - and we’d like to embrace this community spirit as part of our business and how we operate moving forward.

It is no coincidence that transaction reporting is the focus of attention in recent months. The MiFID II regulation is designed to safeguard investors and standardises trading practices across the financial services industry. Transaction reporting is just one of a total of 28 Regulatory Technical Standards (RTS). While the thrust of the standards covers areas such as market structure, product governance and research unbundling, transaction reporting requires firms to identify and report only those trades that are in scope. Once identified, the transactions are reported by the firm on a daily basis to the FCA via the MDP portal.

Given the 406 pages of regulatory standards, why is the FCA so focused on transaction reporting?  The simple fact is that it is the low hanging fruit for the regulator. Setting up the process for transaction reporting was seen by many as one of the easier standards to implement and the use of the Approved Reporting Mechanism (ARM) providers should act as a barrier between the reporting firm and the FCA. The widely held expectation was that all firms should be in a position to comply with this part of the regulation by the time of the go live in January 2018. That was 16 months ago. The recent fines now signal that the settling in period is over and that firms should brace themselves for inspections.

The MiFID II regulation is designed to safeguard investors and standardises trading practices across the financial services industry.

However, the simple truth is that many firms are still struggling to complete their reports with accurate or timely data. This is hardly surprising given the complexity of the requirements. Determining the eligibility of the individual transaction is just the start and determining which of the 65 fields needs to be populated is the second task. While ESMA spent much of 2018 clarifying their interpretation of the instruments in scope, reporting obligations and the various national identifiers through a series of Q&As, confusion continues with issues surrounding the Financial Instruments Reference Database. Many firms are still spending too much time managing changes to their front office systems, order management systems or third-party eligibility processing systems (or even spreadsheets) to put control processes in place to detect erroneous reporting.

Those who thought their ARM would do the heavy lifting were disappointed to realise that this was not the case. The role of the ARM is to provide services to report the transactions on behalf of the investment firm but is not responsible for the content of the reports. RTS 26 of the regulation is clear in that the responsibility lies solely with the firm and that ARMs provide limited protection. In the end, the ARM can only report what it has been provided with. The controls called out in RTS 6 and, in particular, article 15 of RTS 27 are designed to ensure that investment firms have an adequate operational framework in place to detect errors either prior to submitting reports or spot inaccuracies within a short period after the report has been processed by the ARM or the FCA. Mark Steward recently stated: “Firms must have proper systems and controls to identify what transactions they have carried out, on what markets, at what price, in what quantity and with whom. If firms cannot report their transactions accurately, fundamental risks arise, including the risk that market abuse may be hidden.”

The recent fines now signal that the settling in period is over and that firms should brace themselves for inspections.

The 2019 business plan published by the UK regulator has put market abuse at the top of their priorities. MiFID II came into play 16 months ago and we are now seeing the grace period coming to an end. We should expect inspections to start taking place this year. With the recent fines, the FCA are clearly signalling that they are going to focus on transaction reporting. While there may be a degree of leniency for those firms who are still in the process of improving internal controls, for any who are yet to embark on fulfilling their RTS 6 and RTS 27 article 15 obligations it would be wise to get these projects underway shortly.

A recent breakfast briefing hosted by AutoRek for some of the city’s largest investment firms on how to avoid fines developed some key themes that can assist firms in achieving greater compliance. Those highlighted during the session were: implementation of a control framework to increase accuracy of reporting; automation of processes wherever possible; documentation of all automated and non-automated processes; those involved in MiFID II need to know what they are doing and why they are doing it and, lastly, managers need to display ownership of the processes. If the recent fines are anything to go by, compliance is the only way to avoid an adverse inspection.

Luis Ugarelli is Managing Partner at Market Facilitators, an economic consulting facility with main offices in Lima, Peru. The company provides consulting services, advisory and economic studies for different sectors in key economic variables to foster competitiveness and development. Finance Monthly speaks to Luis about the Peruvian transfer pricing system.

Can you explain how the Peruvian transfer pricing system works? What type of documentation does a company have to prepare?

Arms’ length principles were incorporated in Peruvian Legislation in 2001. As the country is aspiring to join the OECD in the near future, Peru has been trying to follow OECD directives very closely. For instance, some of the BEPS actions have already been implemented. The size of the companies, measured by the level of sales (above US$3 million) plus the volume of controlled transactions (purchases plus sales above US$500 M), trigger the presentation of Local File. As of 2017, a condition to make deductible services received from related parties or tax heavens must pass the benefit test. Master Files apply for consolidated turnover of groups above US$27 million. CbC Reports would eventually reach around 10 Peruvian Multinational Groups only. BEPS reports in Peru are sworn informative declarations that may trigger voluntary or compulsory tax adjustments only when results prove to be detrimental for the treasury.

What are the potential penalties for companies if they fail to submit accurate information regarding transfer pricing? Is there an appeal process?

If company fails to present a Local File by due date each year (with the exception of this year, as taxpayers are expected to submit year 2016 in April 2018 and year 2017 in June 2018), fines for not complying are 0.6% of a company’s sales with a ceiling of US$32 thousand by report. The fines are the same if the filing is partial or inaccurate and applies to master files and CbC reports as well. There is a progressive fine reduction for voluntary filing as long as the taxpayer declares it before a transfer pricing audit is open. As conditions requested for the benefit test appear to be excessive, some companies are assuming that these expenses will be repaired on their income tax declaration. Resolutions as a result of transfer pricing audit may be appealed in three instances and may end up in the Tax Court.

What is the Peruvian Tax Authority’s current approach to transfer pricing? How often do they carry out audits?

Statute of limitations of tax obligations is five years. Although tax audits have not followed a particular pattern, some partial audits in transfer pricing have been carried out in the last three years, but have resulted in disputed items that may end up in the Tax Court. Since the government has observed a dramatic tax collection drop in the last five years, part of the blame goes to controlled transactions. Therefore, tax authorities are betting that the situation could be partially reversed with a closer attention and audits to transfer pricing matters. Parameters to define taxpayers under formal obligations have been raised and more revelation is asked, with the intention of focusing on a smaller number of taxpayers (a drop from 6,500 to 3,500) in material transactions with commodities and imports, particularly medicines, consumer goods, capital goods, grains; and in intra-group services and financial operations of all economic sectors.

How do you best help companies manage their transfer pricing issues and what services do you provide?

For Peruvian companies with significant transfer pricing operations, early advice and transfer pricing planning is by far the most effective approach for timely problem recognition and resolution – the sooner, the merrier, as I like to say. Companies do not need to act like they’re blindfolded regarding the market prices for specific material transactions they execute - for those purposes we do comprehensive benchmarking analysis of interest rates, royalties, rents, cost, etc. In some cases, an entire revamping of the controlled transactions is advisable, and this reshuffle can make wonders for the development of a streamlined operation and present a clear and transparent position before the tax authorities.

Contact details:

Email: luis.ugarelli@marketfacilitators.com

Website: www.marketfacilitators.com

What you might not know is that blockchain isn’t just a Bitcoin thing. Across the globe, from corporations to start ups, experts are formulating and implementing new ways of using blockchain technology to improve the way we do things; and the same goes for supply chains. Below Finance Monthly hears form Lee Pruitt, the CEO of InstaSupply, on the ways blockchain can likely better supply chains for your business.

Managing a supply chain is an operational and logistical challenge for many businesses, and the more parties involved, the more complicated it is. The ‘links’ in the average chain can sometimes span hundreds of stages and dozens of locations. Keeping everything running smoothly and effectively whilst tracking unusual or anomalous events can be very difficult.

Blockchain technology – essentially, a distributed, unchangeable cryptographically secured ledger in which transactional data is stored and updated – may provide a way to improve transparency and operational efficiency. But it has to be used effectively.

Here’s how you can use blockchain technology to improve trust, maximise efficiency, and foster better vendor relationships.

Stronger audit trails

Blockchain technology serves as a repository of transaction history. Every time a payment is made, every party is registered and recorded in exacting detail.

This effectively means that every stage of the supply chain has a strong audit trail – and this is good for your business on several different levels. From a legal and ethical standpoint, it means that you can be assured that your suppliers aren’t party to any child labour or money laundering related activity. From a logistical perspective, it means you have end-to-end visibility into how physical items are sourced, delivered and stored.

Any efficiency or productivity gaps can be quickly identified and dealt with. Any items that go missing can easily be found. Delays will become rare, if not a thing of the past.

Blockchain technology means transparent and more efficient supply chains.

Trust

When supply chains aren’t fully optimised, it’s the end customer that is ultimately let down. Elon Musk recently described supply chains as ‘tricky’ – and revealed that Tesla’s new vehicles routinely miss their delivery deadlines.

Blockchain will increase trust among consumers, and among all players in the supply chain. Using shared public IDs and ratings, a clear picture of everyone’s goods and services will be readily available: if you want to consistently deliver value to your customers, they will reward you for it; if you’re looking for trustworthy suppliers, you’ll be able to select them based on clear, real time data.

The technology will also help reduce the instances of fraud – meaning your reputation and finances will be protected.

Streamlined invoicing

Blockchain technology will make the traditional invoice redundant. All purchase orders will be recorded and rendered fundamentally unalterable as blocks on the chain: accordingly, when suppliers approve the purchase order, they have essentially made a commitment to deliver the items/services for the agreed cost and only the agreed cost. An invoice could never be issued to ask for more.

Blockchain will also improve operational performance and the bottom line. Many businesses are looking for ways to integrate these new tech solutions into their daily operations, and they are right to do so. Trust, transparency, and efficiency are qualities that are not only valuable, but in increasingly short supply in current models. Blockchain offers to provide them in abundance.