By Jaco Prinsloo, Certified Financial Planner at Alexander Forbes
Use the new year as a chance to improve your financial health by adopting some resolutions around your finances. We’d all like to be healthier and wealthier, so cutting back on unnecessary expenses and saving or investing more are goals we should all be aiming for. Here are some steps on how to relook your finances:
- Start the year with the end in mind.
Decide what you want to achieve personally, physically and financially in 2020 and set daily, weekly and monthly goals aimed at your end goals.
- Make a smart investment
A book can be the most entertaining investment you make. Pick up one of the several great books available from local authors packed with great financial advice, tips, and tricks for South Africans and enjoy some holiday reading with a purpose.
- Have “the talk”
Financial problems can cause stress for you and your loved ones. Make time to discuss your financial situation, fears, and hopes and get everyone in your family with you on the journey to financial freedom.
- A goal without a plan is just a wish
Set up a budget to serve as the plan on how you are going to spend and save your money. A budget is a great way to keep track of your expenses and determine how much you have for expenses, savings and discretionary spending.
- Check your credit score
Once a year you can check your credit score online for free. See how creditworthy you are and look for ways to improve your credit score. A better credit score helps you get lower interest rates on loans.
- Inspect your insurance
With another year gone, you and your assets are a little older. Review your short term insurance to make sure you are not overpaying based on last year’s asset values and adjust your risk cover policies to make sure you are sufficiently covered against life’s surprises.
- Reward yourself
Reward programmes are an easy way to get “free money” from savings on purchases and free goodies for positive behavior. Just double-check that the price you pay for the reward programme does not exceed the benefits you receive.
- Compare your fees
Request, confirm and review your banking and investment fees to make sure you are getting the most value for money.
- Schedule a meeting with your financial planner
Meet with your financial planner to go over your investments, update him or her on what has changed in your life – marriages, birth of a child or death of a spouse – and ensure your current investment plans are still in line with your financial goals.
- Don’t forget about your tax-free savings account
You have until February 29 to invest up to R33 000 into your tax-free savings account for the current tax year. Don’t miss out on this opportunity as once it has passed, the opportunity to use this investment vehicle in the tax year is gone.
If saving is not already a habit make 2020 the year you go from being a spender to a saver. Just start by spending less and saving more – it is always good to put money away at the beginning of the month rather than at the end when you’ve spent it.
- Go shopping
Get the most bang for your buck by using the internet to shop around for the lowest prices, saving you time and money.
- Review your investments
Review and rebalance your investments according to personal and economic changes and make sure your investments are still suitable for your investor risk profile and investment goals.
- Make 2020 the year you become debt-free.
Calculate your total debt and decide how and by when you are going to pay it off. Start working towards eliminating your debt by paying as much as you can on the debt with the highest interest rate.
- Update your will
If you don’t have a will you need to create one as soon as possible. If you have a will you should review it to make sure it contains your current wishes. Don’t forget to update your beneficiaries on retirement funds and life policies as these are not covered by your will.
- Increase your value
An easy way to increase your value and save some money is to learn a new skill. Learn to cut hair, build a website or become a public speaker. All these skills can increase your value and your potential earning power and help you save some money.
- Use the six month rule
We all have electronics and furniture or even clothes we no longer use. If you have not used the items in the last 6 months, go online and sell it. You will be surprised by what people will pay for your preloved stuff.
- Spend less and save more
Audit your bank statement to eliminate all those unnecessary expenses for stuff you don’t use or need, like the good-intentioned gym membership or the book subscription from a previous hobby.
- Be your boss
Find a second or even third income stream. Like to bake? Sell muffins to your colleagues. Good at playing golf? Become a golf coach. A side hustle is a great way to increase your income and meet new people.
- Fill up your piggy bank
Collect all the loose change you receive through the year in a piggy bank. At the end of the year use the savings to reward yourself – or even better do something good for someone else.
HOW TO MANAGE YOUR CASH FLOW IN UNCERTAIN TIMES
While the world is constantly changing, probably at a faster pace now than ever before, businesses need to manage cash flow and costs to drive success in uncertain times, says Matthew Thorpe, partner at Haines Watts Essex.
Managing people and expenses
There are certain costs that you just can’t avoid as a business – to keep your operation running seamlessly, but scrutinise the detail and cut down on any non-essential expenses. Check things like your SaaS subscriptions and look out for costs that auto-renew and if you do cancel, remember to also cancel your direct debits too.
You might want to put a freeze on hiring new people, but ensure that other roles and responsibilities are clearly and efficiently assigned across your team. The Coronavirus Job Retention Scheme (CJRS) has been introduced by the Government to help UK employers access support to continue paying part of their employees’ salary to avoid redundancies. Affected employees are classed as “furloughed workers”.
Once furloughed, the employee cannot work or they will not qualify for the scheme. For businesses that perhaps need to go further, there may be some roles they don’t need any more, but businesses should work sensitively with people to manage this.
Cash is king
In uncertain times, owner managers will need to keep operations going to ensure financial stability. You should look to manage debt more efficiently by negotiating extended payment terms with creditors. You could also renegotiate loans for longer repayment terms to give yourself a lower monthly payment, helping the business to set some cash aside each month.
As a business owner, you need to create a cash flow projection and update this regularly if you are to improve things. You can do this using financial information to create a picture of how the business will look in the next 12 months. The forecast needs to show revenue sources and expenses, which will show the ups and downs of business income and can be used to make sure that enough finance is in place.
While banks and other finance providers recognise that the cashflow of a business may be disrupted by the impact of Covid-19, they are still going to want to see that you are viable and continue to trade in these uncertain times. Make sure your business is organised and don’t let disorganisation cause unnecessary issues. You can evidence this by having detailed forecasts; current order books and projections (as best as possible).
Having instantly accessible, accurate financial information allows you to plan effectively, spot issues before they become problems and manage your money in the most efficient and rewarding way.
Software is now incredibly user-friendly and accessible from anywhere. For a business owner embracing the technology, this means:
- Invoicing can be done instantly when a job is complete, emailed to the customer with an easy to use link to a payment platform.
- Comparison websites can automatically monitor and help maintain lowest cost for things such as light & heat, insurance etc.
- Technology can be used in place of face-to-face meetings. It can also enable them to adapt production lines to different demands.
All of these things and more, used properly, can make managing your business finances quicker, easier and often cheaper. You will also be able to bring clarity to where your business stands and prepare for the next steps.
HOW FINANCIAL SERVICES CAN GET TO GRIPS WITH RISING SUPPLY CHAIN RISK
By Alex Saric, smart procurement expert, Ivalua
UK businesses have never been more dependent on their suppliers to help them deliver goods and services to their customers. Be it retail, manufacturing or financial services, suppliers have a vital role to play when it comes to innovation and meeting customer expectations. However, as supply chains become increasingly global, businesses are potentially exposing themselves to more risk than ever before.
This is especially true in financial services. Whether it’s the impact of geopolitical events like Brexit or global tariff wars, supply shortages, security or the businesses impact on the environment, an organisation’s failure to identify and mitigate risk could see millions wiped off its share price, and its corporate reputation left in tatters. Risk can present itself anywhere and at any time, so financial services firms must be ready to address it. However, many simply don’t have the ability to evaluate suppliers for risk factors, leaving them wide open to business operations being hindered, or being slapped with financial penalties.
More suppliers, increasing risk
One reason why financial services firms aren’t able to evaluate suppliers is the breadth and scale of today’s supply chains. For example, French oil company Total said in in a recent human rights briefing paper that they work with over 150,000 direct suppliers worldwide. This is just one example of how large and varied the roster of partners has become. Research from Ivalua has found that financial services businesses on average are working with around 3,600 suppliers annually, which is evenly split between UK-based and international partners. That number is expected to rise, with 60% expecting the number of suppliers they work with to rise.
The expanding nature of suppliers is only going to expose financial services firms to more potential risk than ever before, yet 78% say they face challenges gaining complete visibility into suppliers and their activities.
A lack of supplier visibility leaves businesses unable to identify and mitigate against supply chain risk. In fact, almost three-quarters (73%) of financial services firms have experienced some type of risk during the last 12 months. These include; supplier failure (43%), environmental impact, such as pollution or waste (35%) and supply shortages (45%). Supply shortages can be among the most damaging to a business, as seen by both the KFC chicken shortage which closed stores, and the summer 2018 CO2 shortage which caused companies such as Heineken and Coca-Cola to pause production, impacting supply across Europe during the World Cup.
Businesses unprepared for the worst
One way financial services firms can better prepare for risk is to ensure they know what to plan for to reduce the impact. However, whilst some say they have a contingency plan in place to deal with risk, many of them are unprepared. Financial services firms admitted to not having comprehensive and deployed contingency plans in place to prepare the supply chain for risk such as; natural disasters (68%), supply shortages (67%), geopolitical changes (65%), environmental impact (63%), supplier failure (62%) and modern slavery (50%).
In order to effectively prepare for these types of risks, it’s vital that financial services businesses fully understand their suppliers, their business environment, global variations in regulations, geopolitics, and a host of other factors. But for many, there are multiple challenges when it comes to gaining this understanding. A prevailing factor is an inability to gain visibility into all suppliers and activity because supplier management data is stored in multiple locations and formats, making insights difficult to access. This leaves teams unable to review supplier activity and assess compliance.
Making supplier management smarter
It’s imperative that financial services businesses are able to respond or prepare for supply chain risk. Clearly, much more needs to be done to ensure they have complete visibility of suppliers, especially in an era where regulators can levy heavy fines for GDPR breaches and scandals spread in minutes over social media. These types of risks can be reduced in the future if procurement teams have a 360-degree view of suppliers which will help with contingency planning and risk management.
For example, in the instance of supply shortages, plans could be put in place that identify alternative suppliers to ensure any shortages do not impact end users. This type of supplier collaboration is paramount when it comes to managing and mitigating against supplier shortages. When it comes to regulations, financial services firms can’t allow a lack of visibility to limit their ability to ensure all suppliers are compliant.
To do this, teams must take a smarter approach to procurement that gives complete visibility into suppliers throughout the supply chain. This will allow financial services firms to identify and plan for risk, reducing the potential damage, and ensuring they are working with and awarding business to low-risk suppliers. Supply chain risk is rapidly becoming an overarching concern for financial services firms, but by providing the ability to assess suppliers, they will have all the insights they need to mitigate the impact on business operations.
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