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Why is inflation rising and do we need to get used to it?

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At the beginning of 2020, governments around the world faced very difficult challenges and decisions.

What were they supposed to do?

Let people make their own decisions, knowing that this would have a dramatic impact on Covid related deaths?

Or impose lockdown restrictions, reducing the amount of deaths, but producing a serious impact in the economy?

Neither option was without consequences, and we now know that most governments around the world chose the second option.

So let’s explore the consequences that this had on the global economy.

The first one, and most immediate one, was a reduction in private spending. As people were forced to stay at home, their spending options were limited (although to be fair  this came alongside a huge growth in online spending habits).

Then came a dramatic increase in public spending, in the form of private and business subsidies.

And with that… the question in everyone’s minds: how are governments going to afford all these subsidies?

Financing Public Spending

Which brings us to the question at hand: how were governments able to afford the subsidies?

Well.. let’s explore this for a moment.

There are only three ways that governments can fund themselves:

  • Tax revenue
  • Borrowing (Debt)
  • “Print more money” (or the more technical term Quantitative Easing)

 

Tax Revenue

‘Most of us understand tax revenue. So we won’t spend too much time dwelling on this one. Suffice to say that when the economy contracts, increasing tax pressure on the private sector is a recipe for recession, so this was not an option.

Borrowing

Then comes borrowing, and many governments took as much debt as they were able to.

For example, in the 2021-2022 financial year, the UK alone borrowed £143.7 billions according to the Office of National Statistics.

By June 2021, New Zealand’s government had borrowed NZD$ 6.6 billions.

Australia borrowed an unprecedented debt amount estimated at AUD$ 400 billions, taking their debt to GDP rate from 20% to 40%.

But these amounts of money were not enough to satisfy the spending demands of governments during the pandemic, which leads us to the third “funding” method and the most controversial one.

Quantitative Easing (or “printing money out of thin air”)

Quantitative easing sounds complicated, but it’s actually pretty straightforward.

It basically means that the government buys back government debt (in the form of bonds), therefore increasing the value of said bonds and reducing the interest rates.

With lower interest rates, money becomes cheaper, therefore more lending is encouraged.

In short, QE is a way to increase the amount of money circulating in the economy.

It’s the kind of economic policy measure you would take if you were trying to get the economy moving at a faster pace.

And (pay attention here) is the exact opposite of what you would do if you were trying to reduce inflation, or avoid it altogether.

And here comes the million dollar question (or should I say the Billion dollar question?):

 

How much QE can you get away with, until you face the wrath of inflation?

This is a long standing debate between orthodox and heterodox economists (or Conservatives vs. Keynesians), and we are nowhere near settling the dispute.

And while we are trying to figure this out, here comes geopolitics to create the perfect storm.

War in Europe And The Rising Cost Of Food And Energy

The war in Ukraine comes with a dire consequence to the rest of Europe, UK, and the rest of the world.

Russia being Europe’s main energy supplier and Ukraine’s being Europe’s main food supplier, it’s not difficult to explain the grave consequences that this conflict has in the rest of the European economies.

The obvious (and direct) consequences are the rise in the cost of petrol and food.

But what about the indirect consequences?

Virtually every good and service in the economy requires two main supplies: food and energy.

Think about it… it’s not just the grocery and the service station bill. It’s everything else. Even a lawyer needs to eat and drive a car. So does the dentist, the store clerk, the school teacher and everyone else that participates in the economy.

The indirect consequence is a rise in costs in every chain and in every layer of the economy. Some businesses are able to absorb these increased costs, and some have no choice but to pass it on to their customers.

What Can We Expect In The Future? Is Inflation Here To Stay?

The answer to this question largely depends on the economic policies that governments are likely to adopt in the coming months and years.

Are they going to keep expanding the economy’s circulating currency so that people have higher wages and can afford rising costs of living?

This could become a slippery slope, and a self feeding loop with dangerous consequences, as more circulating currency creates pressure on prices, which triggers more inflation.

Or are they going to “bite the bullet” so to speak… and let their electorate deal with the consequences of inflation without taking alleviating measures?

The former seems unthinkable from a politicians perspective, while the latter could create even more economic trouble long term.

Only time will tell. In the meantime, it seems prudent not to discard a future with lingering (and maybe growing) rates of inflation.

Erin Sutton is an online blogger and writer, publisher of Best Catalogues, an online publication that helps UK shoppers make better and informed decisions related to spending and taking credit.

Business

Hidden channel costs: how to find and tackle them

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By Mark Wass, Strategic Sales Director, UK and North EMEA at CloudBlue 

 

Growth for businesses will always be a key objective. However, in this digital age, if it occurs too rapidly, it can often unearth cracks that harbor hidden costs and pre-existing efficiencies.

 When it comes to channel distribution, for the majority of partners, hidden costs are widespread. A lot of partners work with multiple channels and systems, and this can become complicated. It can also affect their ability to track information.  On average, 30%-40% of IT spending  in large enterprises is accountable to inefficiencies caused by shadow IT.

 There is no single root cause of hidden costs. An array of issues such as wasted resources, labour, time constraints, poor implementation oversights and maintenance issues are all contributors, and the cuts only get deeper as partners scale. Here are the ways service providers can eliminate hidden costs.

 

Where to look for hidden costs 

 In general, unaccounted, or unattributed costs originate from four areas, with the first being shadow IT.

 Shadow IT is the use of systems, devices, software, applications, or services without explicit IT department approval. The phenomenon has grown in recent years due to the adoption of cloud-based applications and services, with the average company using 30% more unique SaaS (Software-as-a-Service) apps than they were in 2018. Thanks to the ease of adding new software, departments are going it alone and buying platforms that can be niche, or duplicate processes, and even in some cases using multiple versions of chat apps to communicate internally. 

Mark Wass

The next hidden cost stems from implementation and integration. Channel partners need to work within different systems, and almost always underestimate the budget needed to work with new software solutions. A consistent blind spot across the industry is the inconsistency of implementation and integration at budget.   

In terms of maintenance, it is especially difficult when partners create homegrown software to handle provisioning, relationship management, or data management. While such proprietary software might perform well for initial purposes, maintenance and upgrades can be a nightmare. Likewise, internal knowledge transfer in this situation is crucial.  

And finally, the scalability of expanding from one market to the next is not linear and neither is the cost. Partners that have already launched in one part of the world often think that it will cost around the same to expand into another region, like between the US and Europe. However, this thinking does not consider the additional effort to contend with the new currency, language, audience, and regulation, as well as local operations within the region.  

 

Tackling hidden costs  

The good news is that there are multiple remedies to hidden costs. Integrations, for example, successfully bring together disparate systems and improve efficiency. Partners that have manual processes and pull information from one system before typing it into another are wasting time and resources by dedicating an entire person to this process. Clearly, this should be automated to cut down on human errors and save in the long run. 

Along with integrations, partners should purchase software with scalability and unification at heart. There is no magic platform that does everything entirely so companies should opt for the best of breed, even if the initial investment is a bit more. This will help to offset the concerns of scalability, maintenance, lack of expertise, and potential unforeseen overheads. Moreover, best-in-class platforms help to paint a consistent long-term picture of the health of channel operations. 

For channel health, it is also integral to integrate outside experts to perform an overall business diagnostic. These can be consultants, solution architects, and those alike that know channel software and best industry practices to help architect a scalable and efficient platform. Working in conjunction with the team, these objective outsiders work to find the gaps and tighten any software screws. 

 

Helping the channel by combating inefficiencies

Hidden costs can become widespread, and this can lead to channel partners paying up to twice the price for half the output.

 More than the financial downside, though, hidden costs should be thought of as hidden inefficiencies. Especially in today’s accelerated digital transformation, inefficiencies can make or break fast-growing channel operations. Therefore, weeding out hidden costs with improved efficiencies can work wonders by saving budget and running a tighter ship. 

 Integrated software and platforms can then be used for change. By unifying and standardising existing systems, managers receive a single view of contracts, reporting, sales, marketing, and day-to-day operations. This  provides them with the right tools to achieve sustainable growth. Rather than overwhelming teams with several types of platforms and software, this single operational view allows for the much-needed oversight that is necessary to set a business up for success. 

 It is essential for channel partners to seize the moment and eliminate the perils of hidden costs, especially given the rapid growth of businesses in the digital and cloud spaces.

 

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Business

Automation nation: Liberating workers from desks, data entry and the doldrums

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By

Gert-Jan Wijman, VP of EMEA at Celigo.

 

Just when businesses thought the tough times were over, even more challenges ensued. While still recovering from the financial effects of the pandemic, companies were hit with an economic downturn that’s now resulted in a recession in the UK.

In this economic context, teams are being forced to do more with less. This means onboarding with reduced manpower, delivering ground-breaking marketing campaigns with less budget and mitigating outlay in the middle of a cost-of-living crisis. Being nimble and streamlining operations has never been more imperative.

That’s where automation comes in. While automating before the recession would’ve been the ideal scenario, it’s never too late to get ahead of competitors. It’s only a matter of when – not if – automation becomes standardised, as businesses insistent on using legacy tech and manual processes will be outpaced by those savvy enough to embrace smarter alternatives. In fact, it’s predicted that in just two short years, 70% of large global enterprises will have over 70 hyperautomation initiatives.

For finance teams and the tech-strapped CFO in particular, automation can be a saving grace. Tech stacks are more complex than ever due to the proliferation of specialised finance SaaS applications for quote to cash, Accounts Receivable & Accounts Payable (AR / AP), cash management, tax, accounting close and corporate performance management. Having the tools to automate these processes enables modern CFOs to adapt to changing tech needs, scale quickly and future-proof their organisations.

Automating today to prepare for tomorrow

Too often, automation is viewed as a job killer. We’ve all heard the apocalyptic narratives about ‘robots taking over,’ but that’s an outdated notion. Instead, automation is a job enhancer. Not only does it minimise errors, speed up processes and help businesses cut down on admin, it liberates employees to dedicate their time to be more creative or perform complex tasks.

Take a company like WeTransfer, for example. Bogged down by manual processes, the team struggled with closing financial books and completing billing cycles on time. After integrating its tech stack, quote-to-cash automation worked immediately and the time to close reduced dramatically, significantly reducing the hours dedicated to manual data entry.

Its revenue accountant was then able to work on core tasks in the finance department and alongside sales operations on the process improvements, no longer worrying about completeness issues associated with the sales and financial systems integrations.

Not only that, it liberated employees physically and unlocked access to more valuable talents. Beneath all the technical and monetary benefits, these are the core principles behind why automation will soon become impossible for firms to ignore.

Physical Liberation

Hybrid work has been one of the biggest positive developments driven by the pandemic. However, while employees surely won’t miss long commute times or the constraints of office life, a disparate workforce comes with challenges. It’s vital that organisations can trust their data and business processes in order for effective collaboration to be possible.

Automation can enable this, as it allows cloud-based systems to share data across a business through integration, ensuring all workers have access to the resources they need to work together effectively wherever they are.

This makes businesses nimble, able to operate across multiple locations when needed and well equipped to decouple entirely from headquarters if needed. Workers can then be as effective from home as from the office, ensuring they can maintain a better work-life balance without compromising productivity.

It’s no wonder then that 78% of organisations worldwide think remote working will increase the proportion of their workforce using automation, while over two-thirds (71%) that have already implemented automation are beginning to feel the benefits.

Liberating Talent

Automation also ensures talent is no longer wasted on manual tasks. 3 in 5 (60%) occupations could technically automate more than 30% of their tasks, highlighting the bevy of possibilities and offering a glimpse at the future of work.

When workers spend their time crunching numbers and organising spreadsheets, it’s easy for them to feel like a cog in a machine. With automation, however, they have more room to share their ideas and feel connected to the operations of the business.

With menial tasks taken out of their hands, employees are freed up to perform more complicated and creative jobs, the sorts of work that could never be automated. And by filling workers’ days with more of these engaging responsibilities, they’re able to feel like they have a real stake in the company’s success.

There is also research to suggest that workers can get as many as 100 hours a year back as a result of their manual tasks being automated, meaning everyone could get an extra two weeks of paid leave without productivity taking a hit.

Automating into the future

Already, over 80% of organisations self-report increased or continued investment into hyperautomation initiatives. So the appetite is there, now comes making it a reality.

Automation at scale is the dream, but the transition won’t happen overnight. In a perfect world, organisations will be able to assign all manual and tedious tasks to the machines, with employees only needing to provide oversight when necessary, but there’s a journey to get there.

That’s why it’s critical that CFOs collaborate closely with their CIOs. Only then can we realise a scenario where manual processes are eliminated entirely, and data across systems can be accessed and updated in real-time. But this will require leaders to understand each other’s needs and challenges so they can align their visions.

As organisations become more disparate, this partnership will only grow in importance. CIOs can empower the CFO and their teams to implement the automation initiatives best for them, with IT maintaining oversight to ensure compliance.

With the right structure and mindset, CFOs and the entire C-Suite can be encouraged to pursue digital transformation in a way that’s most effective for them and the entire organization.

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