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CAN AUTOMATION HELP BUSINESSES GET PAID ON TIME?

By Magali Michel, Director at Yooz

 

Procurement process costs account for an average of 60% of turnover for most companies.

On one hand, it highlights the considerable extent of savings that can be derived by optimising the procurement function.

On the other hand, it underlines the overriding influence of suppliers on business performance, largely setting the conditions for companies’ ability to face exacerbated levels of competition and restrictive standards, while continuing to meet the ever-growing demands of their own clients.

So, can businesses improve their supplier and partner relationships by optimising their accounts payable processes?

 

Supplier relationship management: a critical issue for companies

Many companies tend to focus on the first point without always measuring the full impact of their financial policy on managing relationships with suppliers. One trend is for companies to extend supplier payment periods to better cover their working capital requirements.

Of course, it is essential to have an appropriate level of cash and, in some respects, it seems logical to favour inflows over disbursements. But when that reflex is generalised and actually becomes a management method, imbalance or even abuse may not be far behind.

In the UK, small and medium sized businesses (SMEs) across the UK are chasing a combined £50bn in late payments. In total, almost 900,000 hours a day are currently being wasted by companies trying to get paid.

While the UK government having tried a number of times to address the issue, late payments have been hindering SMBs from growing for a long time now. The length of time SMBs and the self-employed are wasting in order to try and get paid is unacceptable. Cash flow is crucial for any business, especially for SMBs, and just a few late payments can tip them into a dangerous financial position.

 

Charter for responsible supplier relations: what are the stakes?

The first risk in poor supplier relations is financial.

Over the past decade, UK businesses have pressured lawmakers to increase mechanisms and encourage companies to respect their commitments in terms of payment periods and deadlines.

In January 2020, Labour peer Lord Mendelsohn introduced a Private Members Bill to aimed at addressing late payments and strengthening the powers of the Small Business Commissioner. The bill aimed to enforce a 30-day limit for all invoice payments and impose large fines on repeat offenders.

Nearly a quarter (23%) of insolvencies in the UK are caused by late payments, and a 2016 FSB report estimated that if all payments were made on time, there would be a £2.5bn boost to the British economy.

An additional risk for bad payers comes is damage to reputation. This risk is far from harmless, particularly in this day and age of social media where information travels far and wide. A brand’s image is an asset that is both precious and fragile.

Another risk related to late payments is quite simply the risk of destabilising suppliers and making relations more complicated. It is important to remember that suppliers are also confronted with their own needs for liquidity. If they have trouble collecting on invoices, they may find themselves in a very difficult situation.

For client companies, paying suppliers poorly is like sawing off the branch they are sitting on. In many cases, the client itself would have much to lose if one or more of its suppliers were to disappear, potentially even putting the client in a position where it must think more about basic survival than properly carrying out its activity.

 

Supplier relationships: who is responsible?

In order to mitigate these risks, it is critical to set up close collaboration between Procurement and Finance departments.

The procurement function, a cornerstone in supplier relations, is now positioned as a major lever for efficiency and productivity. In its study “Futurebuy: The Future of Procurement – 25 in 25,″ KPMG points out the importance for Procurement departments to develop their financial expertise.

That would help improve relations with the procurement departments alter-ego, the finance department, in matters relating to managing supplier relations.

Indeed, while the procurement department is often seen as the gateway for outside innovation, namely as provided by suppliers, it must also be able to leverage key indicators that will enable it to speed up and simplify the production of analyses and dashboards that help with decision-making.

 

How to improve supplier relationships

In this context, document digitalisation and automation technologies represent an excellent solution for optimising the supplier relationship and turning it into its own lever for supporting company performance.

Beyond immediate time savings, supplier process automation drastically reduces data entry errors and duplicates, with the goal of reducing costs and ensuring better management and increased value for people reassigned to more strategic tasks.

A digitalised Purchase-to-Pay process, from orders to invoice payment, archive and storage, enables all involved stakeholders – both suppliers and business teams – to increase the visibility, quality, and efficiency of their P2P process, gain strategic vision on business spend and reduce the processing time and costs by up to 80%.

 

More opportunities than risks

Managing the supplier relationship is an important issue in controlling risks for the company, but it also represents an opportunity.

Smoothing out potential disputes and financial tensions as much as possible by eliminating payment delays is one way for a company to create healthier relations and contracts, while reinforcing and creating new points for collaboration with suppliers.

Building a climate based on trust encourages suppliers’ commitments and enables the company to fully benefit from their expertise and innovation capacity.

This voluntary approach invites companies to recognise that their destiny is now inseparable from that of their suppliers – even if only on the increasing number of topics for which their joint responsibility is engaged.

By optimising management of that relationship beyond a uniquely financial dimension, the supplier ecosystem becomes an essential and undeniable lever that supports the company’s competitiveness.

 

Finance

COULD COVID-19 BE THE CATALYST FOR DIGITAL TRANSFORMATION IN FINANCE?

AI

By Simon Bull, Sales Operations & Business Development Manager at Aqilla

 

We are all now living in a new ‘normal’ where working from home is no longer a luxurious ‘perk’ of the job, but an essential. In the case of many organisations, the transition to flexible, remote working was successful, albeit slightly bumpy. But there is one department that has found it more challenging to transition to the required standards of remote working – the finance department.

The finance department often gets left behind when it comes to digital transformation largely because it is so heavily regulated. And because of this, one of the biggest problems the finance teams face is that it’s sensitive data will likely be stored on a hardware server on office premises. If you look at how organisations update their software as they grow, it’s usually the finance department lagging far behind, or sometimes forgotten about altogether. This is because finance has complex requirements that can lead to the attitude of: if it ain’t broke, why fix it?

Up until now, most finance teams have overcome the challenges this situation presents, but with the repercussions of the pandemic still very much in play, the complications that go hand-in-hand with on-premise technology have been more noticeable than usual. As a result, COVID-19 is becoming a catalyst for a digital transformation in finance, or more specifically moving finance and accounting software away from traditional on-premise solutions to built-for-cloud services. But what are the advantages of this approach, and what should finance teams be looking for in a built-for-cloud solution?

 

  1. Simon Bull

    Cost: The Software-as-a-Service (SaaS) approach that is the basis of many of today’s cloud computing businesses generally offers customers a convenient monthly pay-as-you-go model. Given that all that users need to access the software is a desktop, laptop or smart device and internet connectivity, they can also save money on the server hardware that has previously sat in the corner of the office. Hint: compare pricing from several potential providers to make sure there are no unexpected extras before signing up.

  2. Service: Good cloud-based providers offer extremely strong levels of customer support and service. It should be very easy to get help quickly and conveniently, and they should be in a position to offer advice, identify problems and fix errors without undue delay. Hint: ask for references from existing customers or look for online reviews to assess their service and support capabilities. Also, carefully check their Service Level Agreement (SLA) to clearly understand where their commitments begin and end.
  3. Security: Established cloud providers offer high levels of security, data protection and backup services as part of their ‘as-a-Service’ package. Customers benefit from the protection afforded by security specialists whose job it is to prevent breaches and keep data completely secure. Hint: Check their security policies and consider talking to existing customers about their security track record.
  4. Compliance: Cloud providers specialising in the finance industry should have compliance at the heart of their product set. Hint: Check with potential providers about their levels of compliance and certification, particularly if you have specialised requirements.
  5. Ease of use: today’s built-for-cloud software services are built for purpose, with many offering a high degree of bespoke capabilities so every user can tailor it to their precise needs. This is in contrast to traditional software packages that can be far less flexible, forcing the user to work in a particular way that might not be ideal. Hint: ask potential providers for an online demonstration to check the way the services work meet your needs.
  6. Performance: In the early days of cloud computing, finance software was too basic for many professionals to consider. Today, there are many entry-level services, while others offer a comprehensive range of capabilities to precisely fit the needs of professional finance departments. Hint: evaluate the range of capabilities offered by a cloud provider, which should include areas such as: extensive analysis, proper periodic management and business calendars, multi-currency, multilingual and multi-company operation, full VAT handling International coding, tax and language flexibility, automatic reconciliation / bank integration, built-in key performance measurement, advanced search, selection and drill-down, document and image scanning. Hint: compare the features of different providers in advance – if anything important is missing, look elsewhere.
  7. Regular updates: Software developers find it much easier to update and improve their services when they are delivered online, and can more effectively keep up with finance best practice and changes to rules and regulations. Many also encourage users to suggest improvements or new features which are then provided to customers at no extra cost. Hint: ask providers about how often they update their software and whether you can suggest improvements.

 

For many businesses, these are compelling reasons to adopt cloud-based finance software services, even in normal circumstances. But considered in the context of the current remote working environment, built-for-cloud finance software can help departments to adapt and capitalise on working from home and match the levels of digital transformation seen across many other key business functions.

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Finance

WE NEED FINTECHS NOW MORE THAN EVER

STRUCTURED DATA

Lubaina Manji, Senior Programme Manager, Nesta Challenges

 

Whilst the sun is far from setting on the COVID-19 pandemic, predictions and hopes for a new “normal” are shimmering on the horizon.

 

Amid the trail of devastation left by the virus, there has to be some semblance of change and positivity to be taken. One such shift is the increase in digital services usage which poses a huge opportunity for our fintech community. Confinement has forced even the more sceptical of us to dabble in digital, and embrace how it has made many everyday tasks more easy and convenient.

 

Online and mobile banking has been helping many people stay on top of their finances for some time. Research conducted by Open Up 2020 Challenge last summer found half (48%) of people would like to use online tools and apps to help them manage their money[1].

 

Then along came a global pandemic that has undoubtedly forced the hands of even the more sceptical to log on, download and transact – quickening the pace of long-lasting change in terms of how we manage our money. Recent figures from deVere Group suggest the virus is behind a 72% rise in the use of fintech apps in Europe[2]. Never before have we been so reliant on technology in maintaining some sort of normalcy and in helping us continue day-to-day tasks, like everyday banking.

 

Another unfortunate byproduct of protecting communities from the virus means many people have been left out of work and with less or no income. In times of financial strain, the need for people to engage with their finances – be it budgeting, saving or shopping around for better deals – is far greater.

 

Issues of trust in traditional banking services and a lack of awareness of the helpful money management services available are some of the barriers preventing people from taking more control of their finances. But the solutions made possible through open banking can provide people with a lifeline to build their financial resilience and better manage their money.

 

Open banking has the potential to revolutionise financial services, by giving people control over their financial data in order to access innovative products tailored to them. Since it launched in 2018, open banking technology has opened the door for new fintech innovators to create cutting-edge tools designed to help people better manage their money – from budgeting, debt management, comparing and switching banks to automating savings and more. These could have a significant impact – it is estimated that UK consumers could gain as much as £12bn over the course of a year from open banking-enabled tools[3].

 

So far, it’s been effective – the UK FinTech’s State of the Nation report[4] totted up more than 1,600 fintech firms in the UK in 2019, whilst predicting this could more than double by 2030. Figures from the Open Banking Implementation Entity showed there were 243 regulated providers, 169 third party providers and 74 account providers as of April 2020[5]. The UK adoption rate of fintech is 42% – higher than the global average of 33% – making it ripe for opportunity[6]. Coupled with lockdown restrictions creating greater dependence on technology – including ATM cash withdrawals falling by half[7] – fintechs are well placed to be part of the solution – and offer help to those struggling to manage.

 

With more than a fifth (21%) of the adult population saying financial stress is having a bigger impact on their mental wellbeing than physical health concerns during the crisis, and a quarter more stressed about money than usual[8], fintechs can be part of the support available to them.

 

However, in order to fully realise the opportunity we need to ensure budding entrepreneurs with bold ideas have the means to turn them into reality. Nesta Challenges exists to design and run challenge prizes that incentivise people to help solve pressing social problems that lack solutions. Through our Open Up 2020 Challenge we are supporting 15 fintech finalists to develop their solutions to enable more people – particularly those underserved by traditional financial products – to manage their finances better, whatever their circumstances.

 

Of the 15 finalists, some offer app designed to help people budget,, save, switch and invest – aided with alerts and notifications that allow people to stay on top of their finances and make their money work harder for them for the long term. For example, Cleo is an AI financial assistant that is already helping more than 3 million customers monitor their spending, budgeting and saving, while Moneyhub empowers people to do more with their money by offering actionable insights from a review of all of their accounts.

 

Some of the apps are designed for those with more specific circumstances, such as Mojo Mortgages, which analyses income and transaction data for first time buyers to produce mortgage affordability scores and savings recommendations if they aren’t quite ready to apply. Finalists Portify and Wagestream cater for workers with irregular earning patterns.

 

As well as monetary grants, Open Up 2020 Challenge provides these companies with non-financial support and promotion to help them on their way to achieving their full potential – which in turn helps them reach many people to help them achieve their monetary goals.

 

While COVID-19 has created personal finance headaches for many, it has been inspiring to see how quickly fintechs have been able to innovate and develop digital solutions that help solve these problems and equip people to better manage their money.

[1] Open Up 2020 Challenge

[2] Forbes 2020

[3] Open banking Consumer Priorities for Open Banking report

[4] UK Fintech State of the Nation

[5] Open banking Highlights April 2020

[6] UK Fintech State of the Nation

[7] https://www.link.co.uk/about/statistics-and-trends/

[8] Open Up 2020 Challenge

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