Month: April 2021

Homebuying
ArticlesFinance

Home buying: Is There Really a Financially Best Time to Buy?

Homebuying


Buying a home is one of the biggest investments we make in our lives. However, while the average house price in the UK is valued at £249,633, the cost of mortgages among other factors means that the total cost of the home-buying process can vary between individuals.

Even then, house prices continue to rise year on year. In England, house prices have increased by 7.6% in the past year. Competition spurred on by the housing crisis may mean that this increase is set to continue. This raises the question: when is the best time to buy?

‘Immediately’ is not always the answer. The true cost of a house will depend on your personal finances when you buy, and it can vary depending on which financial schemes you use to help you on your homebuying journey. Jumping into a sale too soon can cost more than it’s worth.

Here, we explore the options for buying your house, what schemes you can take advantage of, and when to buy your home.

 

Government schemes

On 3rd March 2021, Rishi Sunak unveiled his latest budgetary plan for the nation. Included in this were schemes for home buyers which may make the process of climbing the property ladder easier for many people.

 

Stamp Duty holiday extension

The Stamp Duty holiday extension reduces the tax paid when buying properties. Under this scheme, homebuyers will only pay stamp duty on properties above the value of £500,000. This scheme was set to end on 31st March 2021. However, the Government has extended this until 30th June 2021.

Buying a property within this timeframe could save homebuyers up to £15,000 before the tax break ends.

The sale of properties must be completed before the 30th June deadline. However, the opportunity to save on Stamp Duty could be extended based on your buying choices. One national housebuilder, St. Modwen Homes, has its own Stamp Duty holiday extension which is available on a selected number of homes until 30th September 2021. Buying a new build property with this company can help you save thousands beyond the Government’s June deadline when you buy houses in Eastwood or houses in Newton-le-Willows, among many other locations. The housebuilder has also launched a new ‘Mortgage Paid’ offer for those buying a new-build home. Available on selected homes at developments across the country, the company will essentially pay up to six months of your mortgage. So, if you’re ready to buy now, it may already be the best time! The offer is only available for a limited time, but being six months mortgage free could save you thousands.

 

5% mortgage deposit

A new mortgage scheme has enabled lenders to offer mortgages to more homebuyers with lower deposits from April 2021. The Government-backed 95% loan-to-value mortgage scheme means that first-time buyers and current homeowners will be able to purchase a home with just a 5% deposit.  

The scheme will run until December 2022. So, if you want to take advantage of this new offer, applying for a mortgage before this deadline may be the best time to buy. A lower deposit means that you will have more money in your pocket on moving day to help furnish your new home, or some extra cash to save for a rainy day.

The scheme is similar to the Help to Buy: Equity Loan which is solely available for first-time buyers who are buying a new-build home. So, if you’re a first-time buyer, there’s still plenty of time to save up for a mortgage deposit and buy your dream home.

 

First-time buyer?

As mentioned above, it’s now easier for first-time buyers to get onto the property ladder with help from the Government-backed Help to Buy: Equity Loan scheme. Similar to the 95% LTV mortgage scheme, first-time buyers can also use a 5% deposit to buy their home.

The key difference with the Help to Buy scheme is in eligibility and how the finances are organised.

Firstly, you must be a first-time buyer and be buying a new-build home, and you will need a 5% deposit of the value of the property. The Government will provide an equity loan of up to 20% of the property value (or 40% in London), which is interest-free for the first five years. This means you will only need to borrow 75% of the property value from a mortgage lender.

The total value of the property is capped depending on where you’re buying the house, but they’ll likely be above a first-time buyer’s budget. The regional caps range from £261,900 to £600,000:

 

Region

Price cap

East Midlands

£261,900

West Midlands

£255,600

South West

£349,000

Wales

£300,000

North West

£224,400

South East

£437,600

London

£600,000


This scheme runs between April 2021 and March 2023.

 

Best time to save

If it’s not looking like the best time to buy for you right now, it’s always the right time to save. For those buying their first home, Help to Buy schemes along with various ISAs mean that you can prepare for your homebuying journey.

Unfortunately, you can no longer open a Help to Buy ISA. But those with existing accounts can continue to deposit up to £200 each month. When you buy your first home, the Government will top up your savings by 25%. You can save up to £12,000 and receive an extra £3,000 from the government. This incentive gives you up until November 2029 to save and until November 2030 to claim the 25% bonus.

Another scheme that is open to new savers is the Lifetime ISA allowance scheme. You can put up to £4,000 into your ISA each year and the Government will top it up by 25% at the end of the tax year.

This isn’t a scheme for those looking to buy a home in the short term. The money must be in the account for at least one year. The money must also be used to buy your first home, otherwise, the funds are available to withdraw when you’re over 60. You’ll be charged a 20% withdrawal fee if you withdraw the money before you’re 60.

Remember, the higher the mortgage deposit, the lower the loan amount and, therefore, the lower the repayments.

It can be argued that this is an exciting time for those who are buying a home — especially for first-time buyers. New schemes mean that those with a proactive nose to hunt out the best deals can save thousands when they buy a home. But ultimately, there’s no set date for the best time to buy. It’s up to you and your finances. The new buying schemes will be useful for those looking to buy their home in the near future as thousands of pounds can be saved. But those who are planning ahead should aim to save as much as possible before they buy their home, as in the long term, larger deposits make the mortgage application and mortgage repayments easier.

Bitcoins
ArticlesMarkets

EToro Offers Exposure to Crypto Market With New Stocks Portfolio

Bitcoins


eToro, the world’s leading social investment network, today launches BitcoinWorldWide, a thematic portfolio based on the companies in the value chain behind bitcoin. While it includes some exposure to bitcoin itself, the portfolio’s core focus is the companies operating to support further adoption.

“As it crosses into mainstream awareness, bitcoin is increasingly in the spotlight” says Dani Brinker, eToro’s Head of Portfolio Investments. “New all-time highs might make headlines, but the most significant change surrounding the world’s largest crypto is not its price, but the companies building the value chain around it. From mining operations to chip manufacturers and those delivering services to support usage, payments, exchanges and custody, there’s more to bitcoin than you might think.”

Released in 2009, bitcoin currently boasts a market capitalisation in excess of $1 trillion. Throughout the last decade, the first and most famous crypto has gone through multiple stages of adoption – from unfamiliar tech to a household name attracting institutional investment and media headlines. Last year marked another milestone, with payments companies including Square and PayPal announcing plans to support bitcoin payments, setting the groundwork for millions around the world to easily transact in bitcoin. Now, only 12 years after its founding, you can pay with bitcoin in HomeDepot, buy a Tesla, grab a Whopper or KFC (in some countries), buy games in the Xbox Store and pay your AT&T phone bill.

The portfolio includes companies such as Paypal, chip manufacturer Nvidia, mining hardware producer Canaan and newly public crypto exchange, Coinbase, as well as a bitcoin allocation. eToro considers bitcoin’s value chain to include companies operating in the mining, semiconductor, payments, exchange, custodianship and insurance spaces, as well as the asset itself. It intentionally excluded organisations that are bullish on bitcoin but lack business units related to its activity. For example, MicroStrategy, will not feature in the portfolio as its treasury holdings are its only connection to bitcoin.

“Our aim is to provide retail investors with an easy way to get exposure to companies that deliver a service or product essential to the further adoption of bitcoin,” explains Dani Brinker. “It is a broader approach to bitcoin investing that offers a diversified investment, uncorrelated with the bitcoin itself, but maintains exposure to the growth potential of the crypto sector.”

UK Budget
ArticlesBankingCash ManagementFinance

Budget’s ‘Super-deduction’ Capital Allowance Offers Logistics Sector A Golden Opportunity

UK Budget
By Tim Wright, Managing Director of Invar Systems
Chancellor Rishi Sunak’s Budget announcement of a capital allowance ‘super-deduction’ could be a game-changer for many warehouse owners and operators.
The super-deduction, which will apply for two years, allows firms to claim 130% of their expenditure on approved plant and machinery against their tax liability. There is no list of qualifying expenditure, but just about any equipment that one might install in a warehouse or distribution centre appears to be covered and, importantly, ancillary expenditure such as building alterations and electrical system upgrades to allow equipment installation are specifically included.
The Chancellor’s aim, beyond kick-starting the post-Covid recovery, is to address the UK’s chronic underperformance in productivity growth, which was less than stellar even before the 2008/9 financial crisis (2.3% per annum), and since then has essentially flatlined at 0.4% per annum. Discussing the validity and meaning of productivity data notoriously starts heated discussions amongst economists but in the warehousing sector the issues are very real and quantifiable.
The gorilla in the room is of course the inexorable rise of e-commerce, currently representing 30% or more of trade in many retail sectors, and with similar expectations for on-demand fulfilment of orders increasingly seen in business and industrial purchasing. Clearly, fulfilling two dozen orders for individual items is immensely more laborious than serving the same volume by shipping whole cases or pallets – by a factor of 15 according to one US study – inevitably driving down productivity per hour worked.
E-commerce has also driven up product variety, and, critically, the volume of returns to be handled. Yet this comes at a time when securing and deploying warehouse staff is becoming increasingly problematic: many businesses have been heavily dependent upon European labour, which is unlikely to be earning enough to qualify to work in the UK post-Brexit, while creating Covid-safe working in labour-intensive areas is a major challenge. Along with rises in the minimum wage, this is pushing labour rates up.
In addition, increasing capacity by adding more space is not an easy option – e-commerce operators, and businesses hedging against supply chain disruption are snapping up all the available space in what is generally agreed to be an ‘under-warehoused’ country.
These challenges, although increasing, are not new and nor is the obvious solution ­– automation. But apart from the ‘marquee brands’ such as Amazon and Ocado, who have been able to invest large sums in green-field developments, the warehousing sector has been slow to adopt automation, and where it has, the tendency has been to create unintegrated ‘islands of automation’ at particular pain points.
However, for real productivity improvement a warehouse or fulfilment centre needs to address all its many interdependent activities simultaneously:  KPIs in receiving, in put-away, in picking, in packing, labelling and dispatch, as well as, in health and safety.
Importantly, this means a complete rethink of how the warehouse operates. A particular focus will be a move towards ‘goods-to-person’ operations, rather than having people spending most of their time walking unproductively between locations.
It’s easy to understand why many businesses have been reluctant to commit to change. Until quite recently, warehouse automation was ‘hard engineering’ – it involved not only major investment all in one go, but installation caused disruption, even complete shutdown, and was considered inflexible. Any change in requirements could only be accommodated by further significant investment and upheaval.
Happily, these constraints no longer apply. The development of autonomous mobile robots (AMRs) in particular has been a game changer, as has been the creation of easily reconfigurable sortation systems, re-locatable or even fully mobile pick faces, smart automated packing stations, and a raft of supporting technologies such as pick-to-light, along with Warehouse Management Systems that are becoming ever more capable, yet easier to adapt and use.
Such solutions are scalable and can be introduced flexibly, as funds allow. What’s more, they can be readily reconfigured to integrate with subsequent investments, largely off-line through the software, rather than by disruptive re-engineering that requires shutdown. They are also genuinely scalable – in many cases, simply adding more AMRs to the system can accommodate future growth or extension.
Rishi Sunak’s ‘super-deduction’ capital allowance offers the logistics sector a golden opportunity to invest in performance enhancing automation, giving fulfilment operations the boost to productivity needed to cope with the surge in ecommerce orders. It’s an opportunity not to be missed.
Finance team
ArticlesFinance

Finance Risks Rose 20% Over Past 12 Months: How Finance Departments Have Been Impacted

Ray Welsh, Head of Product Marketing, FISCAL Technologies
Finance teams have been one of the most heavily impacted internal teams over the past year as the COVID-19 pandemic turned the way we work on its head. During this time finance departments in all industries have experienced immense pressure, with their financial priorities rapidly changing; the need to tighten the purse strings and shifting operational challenges becoming the most common changes. While successful businesses have always placed a firm focus on ensuring their finances are in order, this has never been more of a focus than over the past year, while also being more of a challenge.
The pandemic put further pressure on finance departments to ensure their controls were as strong as possible during a vulnerable period that saw existing checks effected by the move to remote working and an increase in fraudulent activity. Learning from these challenges will support the future requirements of greater resilience and agility.

 

The new status quo

While the impact in some areas has been clear to see, there have been other areas in which things may have begun to slip through the system. With this in mind, we recently analysed our UK customer data* from the last two years to understand the true impact the COVID-19 pandemic has had on finance teams. Through this research, we found that finance teams have witnessed a 6% increase in reported input errors during invoice processing and a slower rate in the reduction of other processing errors over the past 12 months.
Crucially, FISCAL’s analysis found that across all sectors, the number of risks detected rose year on year by 20% on average, with the highest rise being 37% in manufacturing. In terms of risk value detected and prevented, the average increase across all sectors was 70% – a total of £240million in the 12 months to 23rd March 2021.
When the first lockdown occurred last year, there was much speculation over what would happen – organisations were worried about processes without access to paper documents and were rightly concerned about how remote working would impact security. But we quickly saw that the finance team is more resilient than first thought and the knock-on impact of the pandemic wasn’t as huge as originally predicted.
However, our data analysis did find that the rapid changes resulted in an increase in invoicing errors. Furthermore, the reduction in other processing errors declined at a 6% slower rate in the 2020-2021 period, compared to the same time the previous year. These insights clearly demonstrate that the move to working from home and a change in processes as a result of the pandemic led to gaps in existing control processes.
 

Filling the control process gaps moving forward

With many organisations now considering more permanent flexible working policies post-pandemic, this is an issue that organisations must address: Protecting the bottom line is always of the upmost importance, and as businesses rebuild and recover following the turmoil of the past year, it’s essential that they have the best measures in place to help them achieve this. Because of the rapid changes that had to happen last year, there will be an element of acceptance of some errors, as the acceptable price to pay for continued operations during the most acute phase of the pandemic response, but now that teams have settled into the ‘new normal’ this will not be acceptable going forward.
Organisations now need to ensure that their finance teams have the right tools to empower them to continuously and proactively protect working capital, reduce costs, and protect their P2P processing efficiency, whilst providing assurance to the business that strong financial controls are in place.
Investing in secure, end-to-end payable assurance solutions is worth its weight in gold when tackling third-party and internal threats. Not only do these solutions identify invoice payment errors before it’s too late, but also offers greater transparency. By offering finance departments a clear picture on any weaknesses or reoccurring issues – businesses are then able to address any inadequacies within their compliance processes.
Forensically analysing compliance breaches or process changes to find risks and where they originate will strengthen a finance department’s trust it has within its procedures. When  tasked with processing thousands of monthly invoices – having continuous, automated checking to validate approved invoice payments prior to the payment run will ensure finance professionals can uphold compliance standards – as well as reducing costs.
Having an end-to-end risk management solution also allows customers to forensically analyse 100% of supplier and supplier transaction data before payment. This is done by applying hundreds of checks using financial logic and sophisticated algorithms to achieve a complex analysis, with AI playing a significant role in making this process more effective. With the analysis taking place in the background, alerting your team only to the high-risk suppliers or transactions, their time is freed-up for higher value-adding analysis and modelling work.
Investing in the latest P2P risk management solutions will help businesses manoeuvre through the months and years ahead which will continue to present challenges that originated during the past year. Doing so will increase flexibility – the ability to make future changes without having to accept an increase in risks as the price to pay. Now that businesses are through the initial period of uncertainty, it’s essential we continue tackling the challenges that lay ahead. This means continuing to adapt, innovate and adjust. 
The prolific risks and demands on the Finance department, and the greater emphasis on saving and protecting working capital, means that forensic insights and protection of finances have never been so important.
*Analysis of 104 anonymised UK customers’ risk detection data over 24 months
Bills
ArticlesFinanceFunds

South West Businesses Piling on Debt, Bills and Overdrafts Mounting During Lockdown


A year on from the start of the pandemic, business finances in the South West have been badly damaged, with many business owners increasingly reliant upon costly sources of borrowing such as overdrafts and credit cards, a Business West survey has revealed.
40% of the 550 businesses that responded to the survey reported a higher level of indebtedness than a year ago, whilst a similar number (43%) had 6 months or less of cash reserves remaining, laying bare the huge financial cost of coronavirus despite extensive government interventions in the economy.
With pressures on firms growing after multiple lockdowns, 28% of businesses seeking out finance opted to utilise the Bounce Back Loan Scheme (BBLS) – a government backed initiative offering favourable interest rates and flexible repayment terms, but this scheme has now ended.
Salisbury-based 365 Linen Hire, which provides tablecloths and napkins to the weddings and events industries, highlights how emergency borrowing has taken the strain for many COVID-19 impacted businesses. Its Manager Richard Gould said that as hopes were dashed of the economy unlocking earlier in the year, the business sought out BBLS funds to gear up for a summer reopening, having “held out as long as possible”.
The use of overdrafts and credit cards by local businesses is also relatively high, at 22% and 19% respectively, considering that these sources of finance are more expensive than government backed emergency finance. They are also more common than the formal government backed Coronavirus Business Interruption Loan Scheme (CBILS), which only 16% of respondents chose, typically larger businesses within the survey respondents. The percentage of businesses borrowing money from family and friends is also quite significant, at 11%.
Bristol-based marketing agency Feisty Consultancy was one of the businesses that complained of receiving a rough ride from their banking provider over the past 12 months.
“During the first lockdown at least, the banks were helpful in reducing/removing fees,” said Feisty Consultancy’s Managing Director Vikki Little. “But this stopped some months ago and hasn’t been reinstated, despite the fact that the situation is now worse for many businesses. I wrote to my bank regarding this and was told ‘tough’ essentially.”
If the increased prevalence of short-term borrowing wasn’t worrying enough for the state of business finances, it is particularly so for the self-employed. Two fifths of respondents identified credit cards as their main source of financing during the pandemic – a finding which suggests that the self-employed (many of whom fell through the cracks of government support schemes) were unable to access cheaper, alternative forms of borrowing.
Against this background, Business West is concerned at a potential ‘finance crunch’ coming for small businesses. With repayments starting on government backed loans and the level of (often high cost) debt from financial institutions and others, the burden of this debt is expected to act as a drag on business recovery.
Unsurprisingly, after a year of lockdown restrictions, almost half of the 550 participants reported a deterioration in their cashflow, taking this to the lowest point in the last 3 years, with responses consistent across both the services and manufacturing sectors. “It is dreadful,” said Val Hennessy of the International House language school in Bristol – one of the businesses speaking out. “Virtually no income and little prospect of a real increase in income in the near future as international travel is banned or the costs of travelling to the UK for students is too off-putting. We cannot risk borrowing anymore because the future is so uncertain.” she continued.
For businesses such as The Zoots band, government financial support has unfortunately done little to make up for the income shortfall of a year ravaged by stop-start lockdown restrictions. Its proprietor Jamie Goddard revealed that he is “currently in £30,000 debt” adding “with SEISS grants of only £2500 that covered about 1.5% of my usual turnover” and hopes they “will get something eventually” to address the situation.
Aside from widespread financial worries highlighted by the survey, the region-wide study also found that almost 40% of South West employers had experienced staffing issues as a direct result of school closures.
Stephen Sage, Managing Director of ACES Ltd – an electronics firm based in Bristol – said that along with school closures: “Social distancing measures have slowed our production along with…home working,” before adding “material shortages have also compounded the problem.”
The cumulative effect of rising debt levels and lockdown restrictions on business growth and performance across the region is plain to see.
Over half of respondents reported that their turnover, profitability and cash flow have been negatively impacted as a result of the pandemic. The percentage of businesses impacted in the retail, tourism, food and drink, and consumer services industries is even worse (over 60%), with many delaying growth plans and experiencing reduced profit margins.
Despite the pain of the past 12 months, businesses are remarkably upbeat regarding the future prospects of the UK economy, with business confidence also showing signs of lifting following government’s announcement of an irreversible roadmap out of lockdown in England. On both measures, this represents a marked uptick when compared to the last quarter’s results.
 
Providing his assessment of the survey findings Business West Managing Director Phil Smith comments:
“Whilst the UK’s successful vaccination programme provides genuine light at the end of the tunnel, it would appear that businesses will have to wait a little while longer before they are able to bask in the glow of a dawning economic recovery.
“There have been few winners and very many losers as a result of the pandemic, a good proportion of whom have taken on added debt to help see them through.
“In the best-case scenario, we will see pandemic related debts repaid quickly as business activity begins to ramp up and accelerate as lockdown restrictions are lifted. In the worst case, a mounting debt burden stymies business growth and proves a long-term drag on the region’s economy.
“To see businesses utilising the flexibility of the BBLS is pleasing. However, the fact that more and more businesses are turning to credit cards and overdrafts to solve cashflow issues is concerning. The reliance on friends and family may also be interpreted as a market failure that government and lenders would be wise in addressing.
“We are worried about small businesses and the self-employed’s access to suitable finance during the recovery period. At the end of March both BBLS and CBILS closed, and CBILS was replaced by the successor Recovery Loan Scheme. However, this is available via commercial bank lending and is only government guaranteed for 80% of the loan. Our findings highlight a looming finance gap for smaller firms, given the particular finance needs of smaller businesses, who appear to not be utilising CBILS, perhaps because it is harder to access this more formal bank form of financing. We think further government finance schemes for these smaller firms may be needed.
“After business’ most challenging year in living memory, it goes without saying that eyes remain fixed on the roadmap out of lockdown, as only then do we have the realistic prospect of healing the wounds inflicted by the pandemic and repairing business finances.”
Hospitality
ArticlesFinance

Post-pandemic Financial Concerns: How Hospitality SMEs Can Make a Change

Hospitality


There’s no denying that the hospitality industry has been detrimentally hit by the events of the coronavirus pandemic. With the UK’s continuous lockdown measures forcing the part-time closure of hospitality and entertainment venues, the economy is faced with the largest recession since records began. Other than being subject to tightening restrictions limiting the regular functioning of hospitality venues, business have also had to invest more into safety equipment such as PPE for staff, cleaning products, and staff training programmes- causing business revenues to be dramatically impacted.

However, with outdoor hospitality having now opened on the 12th April and all indoor from the 17th May, there is now some light at the end of the tunnel for many. In the wake of the darkest days of the pandemic, when the nation experienced several tough lockdowns, this only highlights the importance of SMEs assessing their financial situation during financial adversity and indeed, in preparation for it, should it happen in the future. It’s vital that finance departments recognise opportunities to increase revenues, save on costs, and forecast potential issues that could occur.

With this in mind, Wisteria Accountants take a look at how SMEs in the hospitality sector could transform their businesses finances.

 

Fiscal Control and Financial Planning

Throughout the pandemic, the hospitality sector has learnt that they must prepare for every circumstance. Sudden decisions to protect the public are understandable during these adverse times. For example, last year hospitality venues had been restricted by a 10 pm curfew, further reducing footfall in bars and restaurants. This emphasises the importance of financial planning.

Functioning on an operating budget is expected for hospitality businesses. These budgets include the cost of wages, rent, and products. However, with the volatility of 2020, this budget type may not be thoroughly effective. Businesses have had to find additional money for cleaning equipment and staff training.

To help spark ideas as to how expenses could be saved, borrowing budget templates from other industries could help with this. For example, zero-based budgets create an optimistic perspective on cost-saving processes. Instead of looking for where cuts can be made, this budget allows finance departments and managers to argue why they should spend. In a zero-based budget, department leaders must justify every expense based on their utility and potential to drive revenue.

A 91 per cent majority met or exceeded their financial targets using this approach, according to one survey. The money saved by zero-based budgeting is often reinvested for growth. However, businesses may want to consider saving for future financial adversity, especially considering the pandemic. Each new period requires a new budget, allowing finance departments to understand the effectiveness of each approach and where further investment can be made.

 

Purchase management and cost control

For most sectors in the UK, the pandemic has caused revenue losses. However, this is especially detrimental to hospitality industries. The gross profit margin of a business in the hospitality sector is usually 30 per cent, making it one of the lowest profit margins compared to other industries. Even industries with lower profit margins, including construction and car sales, can alleviate the low margins with higher gross profit. Hospitality businesses cannot do this.

With this said, understanding the balance between a reflective cost and a fair one for your products and services is important. While most businesses will want to offer customers a fair price for food and drink, the finance department should identify the true cost of your service. A reflective cost breaks down expenses.

For instance, it would be important to consider the processes that are used to create your service and how much they cost when setting rates for a hotel room. This includes:

  • Staff wages for receptionist and cleaners

  • Electricity and water

  • Breakfast services

  • Interchange fee

  • How occupancy is affected during different seasons

  • How it may be impacted by the continuing pandemic

It’s a given that other expenses could be discovered too. But understanding how these costs are reflected in your price makes it easier to maintain a healthy profit margin.

To help reduce costs that ensure contracts are reliable and effective, a purchasing manager is advised. Finance departments should negotiate on your business’s behalf, with a quick understanding of how each contract can affect revenue and profitability. For example, some drink suppliers may provide free glasses but may be more expensive overall than suppliers who don’t. How the cost of glassware affects this profitability should be considered.

 

Reviewing your payment methods

When it comes to private sector employment, the hospitality sector is the third-largest sector in the UK. It employs 3.2 million people, producing £130 billion in economic activity and £39 billion in tax for the government. However, it’s important to remember that the sector is broad and variable. Many industries offer different experiences with the unified aim to deliver good entertainment, service, and reception.

However, it’s the expenses and how consumers pay that highlight how the industries differ. For example, you may expect a hotel to receive credit card payments more than a restaurant, who may primarily process more debit cards. A licenced bar or pub may accept more cash than the other examples. These differences have a large effect on your finances. As we move towards a cashless society where card payments are more accepted due to their low contact and hygienic nature, it’s important to understand how your finances may be affected.

For instance, it is a priority that your business reviews if the correct interchangeable fees have been paid after using VISA or Mastercard processes. Interchange fees represent 70 to 90 per cent of all fees paid by merchants to banks. For a sector that has relied on cash, it is clear how the pandemic has changed spending habits and how the increase of card payments will affect your finances.

To help gain a better understanding of the best practices in the sector and to find out what other businesses are paying, companies should speak to their audit accountant.  While auditors will not breach other company’s confidentiality, they will be able to aggregate their knowledge of what is going on in the sector and assist you immensely.

It’s vital that SMEs re-assess their finances since there is so much uncertainty as to how the hospitality sector will financially recover from the events of the pandemic. They need to assess the most effective ways to increase revenue and profitability. Finance departments can be a useful business partner in creating business strategy, whether they highlight future adversity or give a reflection of current expenditure. Your finance department should at the forefront of your business, guiding it through this difficult period.

Businesses reopening
ArticlesFinance

Reopening of Retail Could Create Perfect Conditions for Economic Growth Over Summer

Businesses reopening


Despite Lockdown restrictions and post-Brexit trade disruption, February saw the UK economy grow by 0.4%, according to the ONS. Although not quite a boom, this minor growth in economic output is an important foundation for the months to come, and brings ever increasing optimism that the reopening of the economy through April will bring with it an even better performance. “We’re looking for a 4-5 per cent bounce in GDP in the second quarter,” said James Smith, economist at ING. 

February’s improvement from January’s slump was in large part due to the construction sector, which increased by 1.6% thanks to both new work and repair and maintenance on existing rooms and structures. Lockdown has both provided an opportunity for home improvements, as well as new challenges for the building sector as it adapts to Pandemic restrictions and safety requirements, although Ben Dyer, CEO of Powered Now, added that “restrictions seemed to have had a negligible impact on the construction sector so far.”  

As of September, Santander estimated that three in five (61%) of homeowners carried out a DIY or renovation project during lockdown. To add to the economic activity caused by these home improvements, Powered Now CEO also noted that “the Stamp Duty extension has been a house building bonanza, so growth in the industry is no surprise”.  

Now shoppers can visit their local high streets, it is hoped that the construction sector can pass the torch to the retail and hospitality sectors in driving Britain’s GDP growth. Research by Cornerstone Tax, a property tax firm working with small businesses, illustrates this highly positive consumer sentiment – with 53% of the UK wanting to spend their money at local, independent stores. 13% even want to start their own business. This is backed by PwC, which charts the highest consumer confidence since their records began. At +8, it is an incredible 34 points higher than at the start of the pandemic 

This shows that through the restrictions we have all faced, our tastes have changed. It seems the British public want not just to shop physically, but also want to shop at more specialist and independent stores, hinting at a shift in sentiments. We are now more sympathetic and supportive towards independent stores that are part of a community, rather than part of a corporate chain, and the intrepid entrepreneurs behind them that have survived so far through the Lockdowns. 

We have also seen a trend of deurbanisation in the UK – as people leave major cities to look for cheaper properties, rent and more living space now they can work from home. This has obviously effected house prices, with rural areas seeing the biggest rise and inversely London prices falling. However, it has also distributed more consumers throughout more of the UK, which means more spenders and saving stimulating economic activity throughout more of the UK, and crucially, to regions that have long needed it. 

Discussions around saving the high street are nothing new, and have been a part of the British political landscape for years, cropping up at particular moments of difficulty such as the 2008 recession, and now the Pandemic. It is not just good news for the traders themselves, or the shoppers who get to experience something more special, but also the economy as a whole. SMEs account for two thirds of employment, and half of national GDP; meaning this new focus on the high street is good news for everyone. 

David Hannah, principal consultant at Cornerstone Tax, discusses the optimism felt by business leaders in the UK: 

“It has been a tough year for many, but the light is truly at the end of the tunnel for a nation of shopkeepers who can finally serve the public. The 12th April was a vital first step towards reopening the economy safely, and it has come just in time for many – particularly the hospitality and physical retail sectors that have struggled so much through various restrictions on economic life. 

The news that the economy grew in February, even if only marginally, is welcome news for business leaders throughout the UK. This growth is only expected to go one way: up. If the UK can keep infections low, and the vaccine rollout continues uninterrupted, April should be a month of elation as pounds head to the high street.” 

ArticlesTransactional and Investment Banking

How to start your investment journey and increase your income

How to start your investment journey and increase your income

Looking to save money for a down payment on your first house? Not sure how to invest that new inheritance? Or perhaps living through a global pandemic has inspired you to start an emergency fund?

There is never a “perfect time” to begin investing. While diversifying your assets may be the last thing on your mind this year, the good thing is that all you have to do is start. Let’s explore some ideas that will inspire you to begin your investment journey, no matter how much money you have in the bank.

 

Open A High-Interest Savings Account

If you have extra cash you are not using for your immediate expenses or that stimulus check is starting to burn a hole in your pocket, you may consider opening a high-yield savings account. With a high-yield savings account, you can start investing with any amount and still have the option to access the cash quickly in the event of an emergency.

There are many banks that offer options for high-yield savings accounts online that still allow access to cash if needed. Opening a savings account is a risk-free way to begin your investment journey, and there’s no better time than now to get started, no matter your age. Thanks to compound interest, your money will grow much faster than if it were sitting in your checking account, and you’ll be less tempted to spend it!

 

Invest In Real Estate

If you’re looking to diversify your assets, investing in real estate is a low-risk and lucrative alternative to investing in the stock market. When you invest in real estate, you are purchasing a house, condo, or apartment with the intent to find tenants and collect the rent as a profit each month.

Many investors prefer real estate as it provides a tangible, physical asset that can be accounted for and controlled. Real estate also has the potential to appreciate over time as your property’s value goes up, allowing for an additional profit upon eventual sale. If you are considering flipping a house to sell for a profit or investing in a rental property to diversify your assets, consider getting an investment property loan to get started. Just be sure that if you’re investing in a property to become a vacation rental property, you also invest in a luxurious interior to increase your return even more!

While this seems like a no-brainer investment option, there are risks involved with real estate as well. This is less of a casual investment, as you’ll need to do quite a bit of research to get started, and rental properties cannot be quickly liquidated if you need extra cash. You also need to consider additional costs such as hiring a contractor for repairs or a property manager to handle the upkeep of your building, not to mention the potential headache of dealing with renters. Despite all this, the stream of passive income and the advantage of owning a tangible asset that can only appreciate over time, make a real estate investment well worth the risk.

 

Invest In The Stock Market

Many would recommend you invest your hard-earned money in stocks, and experts predict the stock market has the ability to give you the highest potential return over time. When you buy stocks, you are essentially buying a tiny piece of a given company, and the stock market gives an average of 10% annual return on investments according to the S&P 500.

 A benefit to investing in stocks is that you can choose to get as involved as you want or stay hands-off in your investment strategy. If you are interested in the stock market and have the confidence to make your own judgments, it can become a fun pastime choosing where to invest your money. If you aren’t confident yet in your knowledge of the stock market, it’s easy to get started with a beginner-friendly app like Fidelity or SoFi.

The downside in this investment option is that there is some risk involved; the value of stocks can decline over time, and making an unlucky investment can actually cost you, which is the opposite of what we want! If you like the excitement of a little risk or prefer a hands-on investment approach, the ebb and flow of investing in the stock market may be for you.

There are so many options when it comes to investing your money, and the first step is knowing what type of investment is right for you. Start exploring one of these ideas to increase your income and begin your investment journey today!

Property investment
ArticlesFinanceFundsReal Estate

Top Tips to Raising Property Investment Finance in 2021

Property investment


In the UK, property remains one of the most resilient asset classes. From first-time buyers to portfolio landlords, getting established on the property ladder remains a popular way for many to grow their wealth. Depending on an individual’s circumstances and ambitions, Arbuthnot Latham, Private and Commercial Bank, explains the various routes to securing finance for property investment in 2021 and beyond.

 

Property finance for individuals

Many individuals, who have enough capital, will look to supplement their income by acquiring a second or third property on top of the one they live in. This will almost always involve a personal investment of capital and additional funds secured via a loan or mortgage.

The appeal of becoming a buy-to-let landlord is not just the relatively good performance of the UK residential property market, but the fact that the value of the asset can be increased with a proactive approach to property maintenance and improvement. Until now, property has been a very stable asset class, and is one that empowers the owner to increase its value over and above standard market movements. It is important to note, with any asset class, that previous performance is not an indicator of future performance.

If an individual is looking to make this sort of investment, any finance they are able to secure will be contingent on their own circumstances. For example, will they be able to show how they would personally cover a shortfall if rental income doesn’t cover interest payments?

 

Other factors banks consider with individual buy-to-let mortgage applications

Credit rating

Whether they are entering the property investment market for the first time or expanding their portfolio, a clean credit score is an essential part of the puzzle. Small issues like missed payments might not make a huge difference, but County Court Judgements or missed mortgage repayments will be a significant barrier to securing the finance they need.

Minimum income

Most lenders in the UK require a minimum income to consider eligibility, but there are options for those with a lower income threshold, and there are even options available that have no income requirements.

Existing portfolio or assets

What lenders are willing to offer will change depending on if the individual is new to property finance or already own properties. Some lenders won’t consider landlords who own several properties, but this varies across the UK.

 

Property finance for portfolio landlords

Individuals who own four or more mortgaged properties become what’s known as a ‘portfolio landlord’. When they pass this threshold, there are certain expectations on banks regarding due diligence. From here, it’s not just about their own personal circumstances. For example, a bank is required to know the status quo of the rest of their portfolio. They need a deeper understanding of how the assets might interact and will also want to gauge their understanding of the market they’re operating in.

 

Factors banks consider with buy-to-let applications

  • Do they keep accurate records? There are many conditions to satisfy buy-to-let properties (fire safety certificates, guarantees for electrical items, insurance, etc.) More important still for HMOs: annual gas certificates. If they’re disorganised, cannot produce documentation when asked, or their business approach obstructs a bank’s due diligence, this is a red flag when considering a finance application.

  • The bank wants to know that a buy-to-let landlord is competent: aware of their obligations and best practice

  • A portfolio landlord should understand the market they want to operate in. Banks look for investors who have a good handle on their local area. A speculative application – not rooted in a comprehensive business plan – means more risk for the bank and a higher rate of interest.

Portfolio landlords should make sure they chose a lender who is right for them. If the individual are vastly experienced, cheaper rates found on the high street can be the right approach. A note of caution here is that as different lenders’ appetites change, it could result in an ongoing dynamic of regular refinancing to achieve the cheapest rate.

Other investors might move away from -the potentially lighter touch relationship approach of the high street, and opt for a longer-term relationship of consistency where their banker understands their circumstances, has years of sector expertise and can tailor solutions to meet their needs.

This is particularly helpful when circumstances change. The pooled collective knowledge of a real estate finance team can be particularly valuable to help a portfolio landlord adapt when circumstances change.

Digital crypto market
ArticlesMarkets

DFW Based BluCollar to Launch Bold New ICO and NFT Marketplace For the Manufacturing Industry

Digital crypto market

With the ever-increasing popularity of cryptocurrency and NFT (non-fungible-tokens), BluCollar.io is launching its first ICO to capitalize on an underserved market – the manufacturing industry. With little in the way of investable channels, this 2334.60 billion dollar industry (2018) in the U.S. alone, BluCollar is looking to translate those financial transactions and assets to the digital space utilizing the exploding world of NFT’s via its own marketplace. 
“After years of working in the manufacturing industry, we realized that not only do we have massive amounts of transactions that are happening worldwide with a need to move more freely than through traditional monetary infrastructure to keep up, but we’re also sitting on an insane amount of real-world assets that can be tokenized to raise capital. We figured we couldn’t be the only people in this position, so BluCollar was born” – says Sam Bohon, Founder of BluCollar
With a two-part strategy to launch this brave new marketplace, BluCollar will first launch its token on the cryptocurrency marketplace. Based on the standard of Ethereum, by far the most popular open-sourced cryptocurrency blockchains on the market and championed by VISA, PayPal, and popular celebrity investors such as Mark Cuban, and Richard Sherman – BluCollar Token is poised to have a successful ICO Launch on May 15th – August 15th 2021 at BluCollar.io. 
Of course, this is just the beginning. The BluCollar NFT Marketplace is the real hero of the show, allowing manufacturing companies including metal fabrication, construction, and supply companies to tokenize their assets and sell them as NFT’s. These assets can include digital drawings, marketable blueprints, and schematics, as well as real-world assets such as supplies, equipment, and commercial real estate. This enables the companies themselves to raise much-needed capital as well as provide investable ownership to employees as well as the general public looking for a new investment stream. And of course, the currency that powers the marketplace will be BluCollar Token, in itself an investable crypto asset. 
“At the end of the day, we want to help our industry move into the digital age and empower what has always been a rather traditional environment to maximize their financial might. From the workers on the floor to the top CEO’s we can all benefit together through BluCollar and we can’t wait to kick it off!” Sam says. 
After the launch of both the token and marketplace, BluCollar doesn’t plan to rest on its laurels. With a pipeline of spin-off projects such as token and NFT staking and a massive pr campaign already in the works, the sky is the limit in spreading awareness at what a truly massive industry and investable resource this truly is and we’re just at the beginning. 
BluCollar was created to give the manufacturing industry a cryptocurrency and NFT marketplace that represents and empowers the true workforce and disrupts the financial constraints of the current marketplace.
Start Up
ArticlesFinance

Financial Tips For Starting Your Own Business

Start Up
Stuart Clark, Managing Director at Russell & Russell Business Advisers
If one positive emerges from the miserable pandemic year, we have all endured, it is that the number of people in the UK who want to start their own business – to take control of their own destiny – is on a strong upswing.
And it is not just a case of people who have lost their jobs casting around for alternatives. Recent research shows that one in five adults are planning a start-up, a figure which rises to 34 per cent among 18 to 34-year-olds. Only 6 per cent said it was because they had become unemployed.
So, it would appear, the entrepreneurial flame has not been dimmed by the ravages of Covid, but while the ambition to branch out on your own is admirable, it is only prudent to be aware of the pitfalls as well as the pinnacles of being your own boss.
What kind of business is for you? Where does my reward come from? What about tax? How do I price my services? How do I find new business?
These are all valid questions, and it is vital to set out your stall correctly right away, as getting it wrong at the start can prove very costly.
First, it might pay to dispel misconceptions aired in the national press that self-employed people enjoy more tax advantages than employees. This is just wrong. The self-employed have no option as to how they pay tax on profits. That potential benefit applies to owner managers of limited companies.
And it should be remembered that while directors of their own companies may pay slightly less tax, they also contribute a lot more to the economy through corporation tax, VAT, and employee PAYE – and they enjoyed little Government support during the pandemic.
Here are some fundamentals to consider:
 
STATUS: Limited company or sole trader
Sole trader status may be fine for one-man-bands, but businesses seeking investment will want to be a company. There are also potential benefits that companies are thought to be bigger entities than sole traders, though this is not always the case, with customers and suppliers alike.
In addition, whichever structure you choose will affect how you can treat losses, how you pay yourself and how you are taxed.

 

REWARD: How do I pay myself?
Sole traders are taxed on profits. If you make £50,000 profit and take £2,000 a month in remuneration, you are taxed on £50,000, not £24,000.
In a company, profits are taxed at a flat 19%, then shareholders are taxed at different rates on dividends they may take. Roughly speaking, salary plus dividends will result in greater tax savings than salary alone. In the example of £50,000 profits before tax which are fully distributed to the shareholders, this equates to approximately £6,000 extra cash in hand / cash in the business to reinvest each year.

 

What about VAT?
You need to register for VAT if you have sales of more than £85,000 in a rolling 12-month period, whether you are a company or a sole trader, though there are some exempt sales such as medical services.

 

TAX: How much do I pay?
How long is a piece of string? Everyone’s circumstances will differ. What to remember is that paying tax should be a positive – it means you have a successful business. There are ways that you can reduce your liability.
Also, be aware that the first year you do a personal tax return, you will have to pay 150% of your liability, as HMRC will want you to pay 50% upfront for next year. Sole traders and directors need to complete personal tax returns.

 

ACCOUNTANTS: Do I need one?
Yes. That is the simple answer. Accountants are professionals who are trained to make your business more tax efficient and help you manage your finances. They are impartial, scrupulously fair and, above all, on your side. They should also be an investment NOT a cost. They should help you to save money or grow your business.

 

PRICING: How do I get it right?
Beware of discounting. Doing less work at the right price instead of lots of work at the wrong price can have a positive and healthy effect on margins. You need to know who your ideal customer is and what your ideal price point is. This is where a good accountant can make all the difference.
If you buy something for £70 and sell it for £100 then your gross profit margin is 30 per cent. To make £300 you need to sell 10 units. If you gave a 10 per cent reduction in price this would mean your gross profit per sale would drop to £20.
So, to make £300 you need to sell 15 units. A 10% discount means you need to do an extra 50 per cent more sales to make the same amount of money.
 
BUSINESS: How can I keep it coming in?
You can never make it too easy for your customers to do business with you. Get to know them, understand your ideal customer and where they “hang out” so you can target them, either online or at networking events, and consider partnerships with other businesses and use referral schemes.
Marketing is like a little wheelbarrow. You can put all you want in it, but unless you push it you don’t get anywhere!
 
ANYTHING ELSE?
Insurance. As a sole trader you are personally liable, whereas a limited company’s liability is, yes, limited.
Wills and power of attorney. With luck, your business will become an asset and therefore part of your estate. And without power of attorney, money could be trapped in the business in event of personal misfortune, leaving employees and suppliers unpaid.
Remember, accountants think about all the matters above so that you can concentrate all your energies on building the business of your dreams.
Success is there for the taking. Good luck.
Fintech purchase
ArticlesFinanceMarkets

Fintech Platform Butter Raises £15m

Fintech purchase


Butter, the London based fintech platform that started life as the UK’s first Buy Now Pay Later (BNPL) travel agency, has just closed a £15.8m funding round to accelerate the rollout of its responsible open-banking based BNPL shopping app.

 

Who has invested?

Butter has raised £15.8m via BCI Finance, the credit arm of London based venture builder Blenheim Chalcot, as well as a number of other private Angel investors in order to expand Butter’s offering.

 

What is Butter?

Irritated by the lack of flexible payment options whilst planning a holiday, co-founder Timothy Davis was inspired to build the UK’s first buy now pay later travel agency, enabling travellers to spread the cost of travel arrangements over time, with full payment not due until after the trip.

Together with co-founders Stefan Hobl and Nik Haukohl, Butter achieved full FCA regulated status in 2017, and 4 years later, Butter has evolved into a British fintech platform with over 100,000 customers, offering instalments across every consumer vertical and flying the flag against other sector giants such as Klarna.

Butter quickly established a firm foothold in the travel and tourism industry as the UK’s first BNPL travel agency, providing a flexible, cost-effective way to book travel, with full payment not due until after the trip. A ‘layaway for getaways’.

When the pandemic brought the travel and tourism industry to a grinding halt two years later, Butter adapted fast, launching the UK’s first BNPL shopping app alongside their travel offering, enabling customers to spread the cost of any purchase from any online store.

 

What makes Butter better?

Unlike other BNPL providers, Butter’s unique “over-the-top” (OTT) solution enables customers to spread the cost of purchases with every store on the internet, without requiring merchants to support Butter via a technical integration. Instead, Butter’s in-app universal checkout takes care of paying retailers, with customers then able to repay the costs over 2, 3, or 4 monthly payments.

Popular stores in the Butter app include Amazon, Argos, BooHoo, ASOS, H&M, Zara, Hugo Boss, Sports Direct, AirBnB, Currys PC World, Ao.com, IKEA and more.

As the UK’s first FCA regulated BNPL provider, Butter has successfully developed a unique credit decisioning process with affordability at its core, utilising open banking and machine learning to ensure that lending is responsible and that customers are only able to borrow amounts based on what they can afford.

Timothy Davis, Co-Founder and CEO of Butter, commented: “Our goal at Butter has always been to provide consumers with a simple and responsible alternative to credit cards and loans, enabling them to instantly spread the cost of anything from a takeaway to a holiday over a simple and transparent instalment plan, all within one easy to use account.

We want to remove the stigma surrounding the buy now pay later offering and empower consumers by allowing them to budget and spend intelligently and in a manner that suits their individual financial needs.

We’ve set out to achieve this by building a platform focussed around transparency, responsible lending and the ability to transact on bigger ticket items compared to other providers, whilst also offering more choice to customers through our unique over-the-top solution, which enables consumers to shop any online store in existence with Butter.

The funding that we have secured via BCI will help facilitate the scale-up of our business as we continue to pioneer innovation in the buy now pay later space.”

 

Paul Maurici, Investment Manager at BCI, commented: “Our mission at BCI is to be the funder of choice for UK Fintech’s looking to scale.

Butter is a young and ambitious company, which combines a tech-enabled approach to lending alongside impressive customer delivery capabilities.

With its FCA authorisation already in place, the business is well placed to continue strong growth while assisting its customers in managing their money better.”