Below Finance Monthly hears from Catherine Rickett, a debt recovery manager at Roythornes Solicitors, on the topic of avoiding debt, especially at Christmas.

It’s pretty common for people to overspend at this time of year, and most will focus on spending money they don’t have on presents for their loved ones, rather than pay off the debt owed to you.

December can therefore be a tough month for businesses, particularly SMEs who might feel the impact on their bottom line more than a large corporate firm. For companies focused on footfall, the increase in online shopping may mean that sales have declined; your own outstanding invoices are due or income may be affected by closing over the holiday period. Added to all that is the extra pressure of parties, bonuses, and holiday pay.

The UK’s ‘late payment crisis’

Recent figures released by the Registry Trust confirm that, during the third quarter of 2018, 32,629 County Court Judgments (CCJs) were registered against businesses in England and Wales. This equated to a total of £100.2m being owed by commercial entities and represents an increase of 32% from the previous year. The average commercial CCJ has a value of £3,072, and the total figures show that if you have even one debt owed to your business, the impact could be detrimental if you do not have measures in place to protect yourself.

Further to this, annual research by Bacs Payment Schemes, part of payments authority Pay.UK, found that the country’s SMEs could spend up to £6.7bn this year in order to get back money owed by customers, up from £2.6bn in 2017.

When it comes to the festive period and late payments, the absolute worst case scenario is that your customer’s business fails in the New Year before you’ve been able to collect payment, leaving you completely out of pocket.

1. Know your client! The best way to protect yourself from dealing with potential insolvency is, above all, to know your client, and to put in place a few precautions. Consider undertaking a credit check on new or even existing customers if you are having difficulty in obtaining payment. It may be that your customer is unable to make payments due to their own financial problems. Account application forms are an excellent way of identifying your customer from the outset. You need to know who you are contracting with in order to pursue the correct person later on if necessary. It’s very simple to carry out a free check of the insolvency register before allowing a customer credit, and credit checks can be undertaken for a relatively low fee.
2. Make it easy for your clients to pay. The easier you make it, the more likely is it that they will pay you. Consider having card payment facilities, BACS, direct debit, online payments or even PayPal. Be proactive about collecting payments from clients. Have solid, late-payment penalties and collections polices in place, and stick to them. Ensure that you keep copies of correspondence with the client including call logs, emails, letters and proof of delivery or collection. These may prove invaluable if the matter proceeds to court.
3. Consider applying an incentive for early payment. Money is better in your pocket than in your debtor’s and whilst you may feel uncomfortable lowering your prices for early payment, sometimes it can cost more to recover a debt than any discount applied.
4. Have clear procedures. You need effective systems in place, with standard letters going out the day after an invoice is due and then seven days after. These are very simple procedures to implement but effective – they not only give you a paper trail but act as a polite reminder for clients where an invoice might have slipped through the net.
5. Keep a ‘cushion’. Ideally three months’ operating expenses will protect you from unexpected cash flow issues. Bad payers are a business reality and if your company is working from an account balance of nil, one slow sales month could mean instant disaster.

If you do happen to find yourself in the unfortunate situation of being unable to recover your money, there are a few general things to be aware of, which could help allay your concerns over the costs of recovering the debt. If you have a term in your contract for interest, then you must adhere to it. Otherwise, for commercial debts, the Late Payment of Commercial Debts (Interest) Act 1998 gives protection to businesses which are owed money by other businesses in terms by assuring interest is payable at 8% above base rate.

In addition to this, you can claim late payment compensation and recovery costs under the Late Payment of Commercial Debts Regulations 2002 and 2013. These regulations provide that, as a supplier, you would also be entitled to a fixed sum of compensation as follows:

• £40 for a debt less than £1,000
• £70 for one between £1,000 and £10,000
• £100 for debts over £10,000

Costs incurred by creditors when instructing a lawyer or debt collection agency are recoverable, however, once the matter proceeds to court, it will be for the court to decide what costs are payable, dependant on the type and value of the claim.

If the debt is paid, but paid late, you are still entitled to claim late payment compensation and interest up to six years later.

Long shop queues, busy high streets and a distinct lack of money can be tiresome and stressful. So, we’ve rounded up the top five Christmas shopping hacks to get you through:

1. Know when to look for deals

To save a bit of money over the Christmas season, it’s important to know when to do your shopping. Lots of shops will have deals on over Christmas to encourage shoppers into stores so look out for deals in magazines, newspapers and on social media.

Black Friday is also a great time to do the bulk of your Christmas shopping. This year, Black Friday falls on the 23^rd November but many shops will be offering deals for up to a week before. Find out what deals you could snatch here.

2. Suggest Secret Santa

If you have lots of people to buy for; a big friendship group or a large family then you’ll understand the struggle of buying presents for everyone. But this is the year that you should suggest a Secret Santa with a price limit, it will save you shed loads of money. You can even organise your Secret Santa online on DrawNames!

3. Stock up with on-the-go, filling foods

If you’re going to hit the high street, then make sure you’ve stocked up on filling, on-the-go foods to save you spending money and time on expensive high street food options. Lizi’s Breakfast Drinks  from Lizi’s Granola (Available in Sainsburys, RRP: £1.49) are the perfect on-the-go option as they’re full of protein and fibre to keep you going! If you’re after something slightly different, then Jake & Nayns’ Naansters (Available in Sainsbury’s, RRP: £2.00) are the perfect option. They are delicious naans stuffed with authentic curries that can be eaten cold and on the go.

4. Buy late Christmas presents

If you’re not seeing someone until after Christmas then why not buy their present late? Prices are slashed on Boxing Day and it’s the perfect opportunity to buy lovely presents for half the price, or to stock up on presents for next year! If you want to get ahead of everyone else then check online on Christmas Day, most shops release their sale items then!

5. Consider DIY presents

You don’t have to be an art and craft whizz to make a DIY present. DIY presents can be a great way to save money and still give personal and thoughtful gifts. You could simply buy a cheap frame and print off a friend’s favourite quote or saying to pop in the frame – easy! Check out this YouTube video for a bit of inspiration.

This is the question Betway Insider asked 2,000 Brits, to reveal what the nation would spend a million on.

Despite claims that £1 million isn't enough to retire on, our research found 50% of Brits would leave their jobs today, with men being more likely to leave work than women.

Betway also took the question internationally and found in the US, just 36% would stop working, with 41% of mainland Europeans also packing up their desks.

When it comes to making money, the research found something surprising; Generation Z (18-24) are most likely to start a business with their million - a choice more popular than buying a holiday or paying off debts.

For spontaneous spenders, the word “budgeting” can cause alarm bells, with the thought of having money left over at the end of the month seeming unattainable. People often think budgeting means having to cut back on the things that they enjoy. Being money smart doesn’t have to mean you miss out.

It was recently reported that in their lifetime, a British person will spend on average £144,000 on impulse shopping. This can include anything from the chocolate bar that you grab as you get to the till and other small purchases which soon add up, to regularly splashing out on new clothes.

There’s nothing wrong with treating yourself every once in a while, who doesn’t deserve a little retail therapy. However, if this is happening a little too often and you’re in need of looking after the pounds, there are a number of changes you can make.

The experts at PIWoP, a price drop alert tool, know how important the value is of every pound that you save. They offer five ways that people can create healthier spending habits and become money savvy.

1. Are you more attracted to the sale or the item?
   

   It can be tempting to pick up a product because the discount on it seems too good to miss, sometimes this appeals to consumers even more than the item itself. If this is the case, think about if you really need it, if it’s the money off label that’s caught your attention rather than the actual product, leave it on the shelf and save yourself money. That way, when you see something that you really want, even if it’s at full price, you’re more likely to have the extra money available to buy it.

2. Budget and prioritise
   

   Some expenses come out every month, write down what these are and then work out what you have left over. Then factor in things which are bound to occur, such as meeting friends for dinner or needing new school shoes for the kids. Prioritise these additional outgoings, certain things will need budgeting for, a weekly takeaway pizza is unfortunately not one of them! Cutting out spending that isn’t a priority could leave you with considerably more money at the end of the month.

3. Why are you spending?

   Treating yourself to a new outfit so you feel confident at an upcoming event or rewarding yourself after a lot of hard work is of course okay. However, if this happens on a regular basis and your bank account is suffering for it, it might be time to change your spending habits. Consider why you are spending and how productive it is. For example, if you spend when you are stressed or bored, there are other ways to blow off some steam that are considerably cheaper. Spending is often used as a short-term fix to feeling better, as soon as you remind yourself of this, you’ll be less tempted to overspend.

4. Do you need the item now?
   

   Finding a product that you really like or can imagine yourself needing for your next holiday or when the house is redecorated can make it easy to buy it right away. However, think about if you really need the item right now. If you’re moving house next year, although those lamps or expensive armchair might get you feeling excited, it might be better to wait for any upcoming end of season sales. Technology is helping consumers to do this by taking price comparison services one step further, such as the PIWoP tool. It allows consumers who have the tool installed on their computer, tablet or phone and see an item they like, to use it to enter the price they want to pay for it and the tool then alerts them if that item does go to or more likely below their PIWoP (Price I Want to Pay). Even waiting until the next day can make you realise that you don’t really need it, or that your money could be better spent elsewhere.

5. Set goals
   

   If you’re a real foodie who enjoys going out to eat, creating healthier spending habits doesn’t mean you have to stop doing what you enjoy. Or you might be interested in fashion and are eager to keep up with what’s new this season. Set yourself goals such as only eating at a restaurant one or two times a month (or however much you can afford without overspending) or allow yourself a couple of treats a month when it comes to clothes. Saving money while still allowing yourself a few luxuries will feel much more satisfying than regularly spending and then feeling stressed a few weeks after.

If cash is in decline, how does the future look for finance?

Once the preserve of banks, states and major institutions, the world of finance has seen big changes in its product offering. A huge growth in tech companies creating ways to make spending easier for both consumers and institutions has seen a shift away from banks ruling the finance industry. Cryptocurrencies have gone even further, removing the need for major institutions to even get involved with both positive and negative results.

Money comparison experts Money Guru have analysed the growing payment trends, how tech and finance have formed an unlikely partnership, and what the future has in store for our spending.

World

Payments

Budgeting time is here, and you’re likely going to make some safe assumptions on the budgeting based on previous years, experience and forecast. But is are these backed by actual real data? Below John Orlando, CFO at Centage Corporation, talks Finance Monthly through data integration in budgeting, looking at specific trends we can expect in 2018.

At the present moment, the economic future looks good. Unemployment is dropping, inflation is manageable and both the House and Senate passed tax bills that will slash the corporate income tax rate, giving them added cash to grow. Over the past few months I’ve talked to many CFOs who say their companies are eager to expand and they’re actively building growth assumptions into their budgets.

However, even in the best of times, there are risks to growth since at any time some world event can affect economic conditions. Performance monitoring and forecasting are part and parcel to business success in a growth economy, and to the end, 2018 will see some positive data-driven trends emerge that will make it easy for executives to keep a watch over their businesses.

The data goldmine: CFOs and financial teams will look to the robust data-generated HR, CRM and other platforms to feed their budget models

Many mid-size companies have implemented third-party HR and CRM systems, platforms that generate robust datasets. For instance, PEO providers maintain detailed records on every type of employee or contractor who works with the company, as well as their benefit requirements. Salesforce.com tracks virtually any type of sales and metric important to the company. This data, much of it market-tested, offers a level of detail it would take an army to create. By entering or importing it into a budget model, finance teams can create highly detailed and robust budgets in a remarkably short time frame.

Organizations will be more assertive with their assumptions

With robust and accurate data from internal systems populating the budget, executive teams will have access to variance reporting that is far more accurate than ever before. Moreover, this level of specificity will prompt CFOs to be more assertive in their assumptions, as well as provide the confidence management teams need to execute on their growth plans.

Greater accountability in business decisions

Marketing pioneer John Wanamaker famously said, “Half the money I spend on advertising is wasted; the trouble is I don't know which half.” He wouldn’t say that if he were alive in 2018. The combination of robust data and better performance tracking will make it easier to assess the outcomes of virtually all business decisions (including advertising campaigns). The result will be greater accountability in business initiatives as CEOs obtain the tools to compare current results to the budget, forecasts and what occurred in the past.

With greater accountability comes greater learnings and more success

Armed with a better sense of what worked and what didn’t, business leaders will have keen insight into which activities, markets or initiatives are worth repeating. I can envision companies establishing new metrics with a greater degree of specificity than was possible in the past, supported by data-driven budgets and the ability to track budget versus the actual on a constant basis.

Forecasting will be the next big innovation in budgeting

Looking at the budget software market itself, I believe the next big innovation will be easy forecasting, driven by customer demand. CEOs in particular want streamlined and simple forecasting whether it be monthly, quarterly or half year, and will pressure their providers to deliver it.

I, of course, support this demand. As anyone responsible for a budget knows, within a few months of a budget’s completion, there’s a good chance some or all of it will be out of date. Benchmarks must be reset regularly as market or economic conditions change. If a particular product suddenly begins selling better than another, the company will no doubt want to rejigger resources in order to exploit the opportunity (or retrench in the face of disappointing sales). This is particularly true when companies are embarking on ambitious growth plans.

Growth opportunities and market conditions will move CFOs away from spreadsheets to budget models

Ten years ago, 90% of mid-size companies built their budgets in spreadsheets; today from what I see, it stands at 80%. As more and more executive teams realize the inherent power of a budget, I suspect that number will go down quickly, replaced by budgeting software that allows them to monitor performance much more frequently. But don’t expect a public mudslinging between budget-software providers. Growth in our market will come from first-time customers, rather than

According to recent figures recorded by HIS Markit for Visa, the UK is to expect a 0.1% dip in spending this Christmas period, during the key shopping months of November and December.

Physical store spending is expected to drop 2.1% on the high streets, while in contrast, online sales are expected to rise 3.6%. Online spending for the same period will also account for a record share of the shopping spend, as for every £5 spent, £2 would account for online sales.

Over the past few years, shrinking figures for high streets shops in the Christmas period have been attributed to rising personal debts, interest rate rises, static or lower wages in the face of increasing inflation, and the current weak phase of the pound.

Rob Meakin, Managing Director at Loyalty Pro had this to say for Finance Monthly: “Consumer spending always fluctuates over the calendar year, but the news that Brits could spend less on Christmas for the first time since 2012 is a grim wake-up call for retailers as they approach their busiest and most profitable period. With consumer confidence already low, retailers will have to claw back the attention of their audience and change the overall sentiment that looks set to discourage shoppers by offering their customers rewards for their loyalty. Regular Christmas deals are no longer enough with rising prices and inflation set to impact customers’ appetite. Retailers, if they haven’t already, need to understand the ‘membership economy’; consumers want to feel part of an exclusive club and with fewer pounds to be spent, consumers will be looking at the best deals from the retailers that understand them best. Loyalty is under threat, but a personalised and reliable strategy will trump most other approaches.

“Putting personalisation at the heart of everything on offer will instantly add value to the customer experience. Loyalty schemes are another sure-fire way to extend the customer’s journey and build a long-standing relationship that encourages growth through periods of uncertainty. It’s also the exact reason why high-street vendors such as Boots and Sainsbury’s prosper during high-pressure peak periods; Boots constantly sends its customers exclusive offers tailored to their shopping habits, while Nectar points organically drive shoppers to the grocer. The one truth in all of this is that customers will not wait around for the best service, they will demand it. And a mix of personalised bargains and loyalty solutions could be the differentiator between a successful or unsuccessful Christmas.”

Ray Dalio, the founder of the largest hedge fund in the world, told Henry Blodget that investors should have 5% to 10% of their portfolio in gold. During that same interview, Dalio called bitcoin a "speculative bubble" and said "bitcoin is not an effective medium exchange by and large" and "it's not easy to buy things with the bitcoin."

Dalio isn't the only one asking these questions about bitcoin. If bitcoin really is a currency, then it is important that you can buy things with it. But this may not be a fair argument. We all seem to accept gold as a storehold of wealth and as an alternative currency even though you really can't make purchases with gold.

So in an effort to fairly compare gold and bitcoin in this vein, we went out into the world to see how easy it was to spend both in everyday transactions. It turns out it isn't easy to spend either. The only person we could find who accepted gold in New York City was Donald Trump in 2011.

Bitcoin is slightly easier to spend. We couldn't use our bitcoin at Subway, which is on a few lists of retailers that accept bitcoin. Le Village, a restaurant in New York's East Village that many have reported accepts bitcoin, was closed down when we tried to eat there. But we did have some luck spending bitcoin.

We found that it was easy to use bitcoin on Overstock.com. Also, my daughter's preschool accepts bitcoin for tuition payments. But if you really want to use bitcoin in everyday transactions, you can get a debit card that allows you to spend bitcoin easily. But maybe we are simply using the wrong words when we talk about bitcoin.

As Adam Ludwin, the founder and CEO of Chain, says in his open letter to Jamie Dimon, "since this isn't about cryptocurrencies vs. fiat currencies let's stop using the word currency." He goes on to say that he prefers to think of them as "crypto assets."

Finance leaders are taking swift steps to invest and adapt to help their businesses navigate the unpredictable path ahead, according to new insights from some of the UK’s leading CFOs.

The 2017 Global Business and Spending Outlook by American Express and Institutional Investor surveyed 100 senior finance executives in the UK, more than half of whom work for companies with more than $1 billion in annual revenue. It gives an important glimpse into the thoughts and strategies of the UK’s most influential CFOs as the asks, and influence, of the CFO has never been greater.

There is understandable caution in the market, given geopolitical events unfolding around the world. However, rather than tightening the purse strings, almost all the finance chiefs surveyed (99%) say their company’s spending and investment will increase worldwide during the next year.

And CFOs are playing a central strategic role when it comes to mitigating the impact of ever-changing market conditions, indicating the evolution of the CFO into the Chief Flexibility Officer, with more responsibility but also more influence across the business than ever before. In fact, more than eight in ten (81%) say that the most senior financial officer wields more influence over strategic decision making than the CEO in their business.

Boosting competitive advantage seems to be the main strategy for CFOs tackling the uncertain economic climate. Ensuring the organisation remains competitive is cited as the biggest business priority (67%) and 92% of CFOs are increasing spending to ensure this happens.

To strengthen this competitive advantage, companies plan to spend more on customer service (67%), technology infrastructure (51%) and labour/headcount (48%). This is supported by reports of increased pressure to compete on the quality of customer service (84%), a focus on information security and how difficulties in hiring and retaining employees (sales and marketing staff in particular) are preventing businesses from hitting their goals.

But finance execs are also investing in financial reporting and compliance (37%), production inputs (35%) and advertising, marketing and PR (31%) as transparency remains critical, prices rise and the battle for market share continues to wage. And 59% say exports are set to become more important for growth.

Jose Carvalho, Senior Vice President, Global Commercial Payments Europe at American Express says: “CFOs in 2017 don’t just have to balance the books – they are having to tackle everything from automation to international trade, and plan their investment accordingly. The Chief Flexibility Officer isn’t just the guardian of the purse strings. They are absolutely critical to helping businesses survive and thrive, by investing in the right areas, in the right ways.”

“We work with business leaders across the country to make sure they are set up for success today and in the future. As a result we know how important it is for finance teams to have tools at their disposal to help them operate and grow their business efficiently – and for them to deliver the strategic value we know will be so important for the rest of 2017 and beyond.”

(Source: American Express)

Challenging the status quo thinking that more government spending boosts the economy, a new report released by the Pacific Research Institute found that bigger government does very little to boost the economy. Part 2 of Beyond the New Normal concludes that high taxes and government spending actually takes away the ability of people to spend and invest, and grow the private-sector.

"Government often 'invests' tax dollars on new programs and assumes that if you spend the people's money, you will grow the economy," said Dr. Wayne Winegarden, PRI Senior Fellow in Business and Economics, and co-author of Beyond the New Normal. "What Washington fails to understand is that government overspending doesn't grow the economy. The best way to create jobs and lift people out of poverty is to reduce high tax rates and let Americans decide for themselves how to spend or invest their money."

Among the key points:

• Total federal, state, and local government expenditures are near all-time highs relative to the ability of taxpayers to afford these expenditures.
• When government spends money, all that is known are the costs that have been incurred. Without further analysis, it is unknown whether these expenditures are adding value to the economy. Government expenditures only add value to the private economy only when the benefits from those expenditures exceed the economic costs imposed on the economy.
• Tracing out the growth and composition of current government expenditures, as well as the large costs inherent in the current tax system, additional government expenditures are not meeting this criterion.
• Treating the costs of providing government goods and services as if they represent the value added from that spending creates a distorted view of the impact from government expenditures on the economy. It automatically assumes increasing the cost of government increases the value created for the private economy. This assumption is particularly problematic given the current size and composition of government expenditures.
• Additionally, whether government expenditures are adding value to the economy should also be judged based on the goals of the government programs. For instance, based on the original goal of income support programs (e.g. the elimination of poverty), expenditures on income support programs are not achieving their designated goal.
• Policymakers should focus on assessing the value created by government expenditures, and acknowledging that government expenditure programs with low or negative net value do not stimulate the economy.

Beyond the New Normal is a multi-part study by Dr. Wayne Winegarden and Niles Chura, which makes the case that future US economic growth can meet – or exceed – past growth trends if the right economic policies are adopted.

Dr. Wayne Winegarden is a Senior Fellow in Business and Economics at Pacific Research Institute. He is also the Principal of Capitol Economic Advisors and a Contributing Editor for EconoSTATS.  Niles Chura is the founder of Ouray Capital.

(Source: Pacific Research Institute)