Transforming Finance: The Role of a Financial Technology Company in the Digital Age

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StrategyDriven Managing Your Finances Article | Transforming Finance: The Role of a Financial Technology Company in the Digital Age

FinTech companies are putting a new twist on financial concepts. The innovations are endless, from peer-to-peer payments to automated portfolio managers and trading platforms.

Finance digital transformation involves leveraging cutting-edge technologies for better operational efficiency and enhanced strategic decision-making. Streamlined processes lead to cost savings over time, while real-time data insights help leaders to make informed choices.

Streamlined Processes

Fintech innovations have transformed the financial sector, fostering inclusivity, enhancing operational efficiency, and facilitating personalized customer experiences. The advent of digital banking, encompassing features like robo-advisors and mobile payment systems, has significantly benefited both consumers and businesses.

Streamlining business processes is a critical component of any enterprise. Efficient workflows help you maintain consistent work quality, reduce waste, and maximize profits. This can be done by adequately dissecting existing processes and identifying redundancies and loopholes. It can also be done by leveraging BPM software tools to automate them.

It is important to note that a process workflow differs from a procedure. While a method can be an entire set of steps, a workflow is the specific task sequence that achieves the desired output. Streamlining business processes is easy and beneficial for employees because it allows them to work smarter, not harder. Aside from improving employee morale, streamlined business processes are critical for maintaining a competitive edge.

Increased Efficiency

A company can increase efficiency by decreasing waste and increasing the helpful output produced with the same resources. This can be done in various ways, including automating processes, restructuring how tasks are completed, and minimizing the amount of time employees spend on non-productive activities.

For example, a manufacturing company can cut costs by reducing employee headcount. However, suppose the business continues to rely on a single vendor for raw materials, and production grinds to a halt when the supplier runs out of supplies. In that case, the company still needs to be more efficient.

Financial technology companies can also help improve efficiency by introducing new tools and products to the market. A prominent illustration is a mobile banking application, which enables users to view and manage their bank accounts on a tablet or smartphone. These apps can even provide bill pay, deposits, and loans. They are essential to financial inclusion initiatives because they help people everywhere get imperative banking services and improve their financial knowledge.

Better Customer Experience

Finance teams are also increasingly concerned about maximizing customer experience (CX). With increased competition, more complex security regulations, and higher customer expectations, it’s never been more critical to get CX right.

Using emerging technologies to automate and streamline processes, increase efficiency, reduce errors, and offer easier-to-use data and reporting can positively impact CX. Offering self-serve options such as frequently updated FAQs, chatbots, and 24/7 support is one way to elevate the customer experience.

Unfortunately, when the term “finance transformation” is used – usually by vendors when discussing their technology – it can be misleading. Implementing a new budget planning system doesn’t constitute finance transformation, but a complete overhaul of process and culture does. Without both, a finance digital transformation will only be half-successful. This is why it’s essential to include buffer zones for unforeseen obstacles and keep everyone in the loop throughout the process. This makes it easier to ensure that everyone is aware of the possible advantages and effects of the change.

Data-Driven Decisions

Financial institutions that make decisions based on data-driven insights are more likely to stay competitive and improve their products and services. To be data-driven, however, institutions need to collect and analyze information from various sources. Fortunately, today’s advancing technology can help to streamline the process.

By using knowledge management (KM) tools, financial companies can better understand customer behavior and market trends. Moreover, they can use this data to optimize internal processes and reduce costs.

Successful finance transformation requires commitment, dedication, and expertise from a team. This includes a leader with experience in the industry and a solid track record of driving business value. It also involves a communication-first approach to ensure employees feel heard and have the training and resources they need to succeed. Lastly, it means setting goals that align with the company’s long-term strategy. This can help to overcome resistance to change and support an effective and sustainable finance transformation.

Resources:

https://www.forbes.com/sites/forbesbusinesscouncil/2023/10/10/how-fintech-is-transforming-the-finance-world/?sh=2494735c50b7

https://current.com

https://www.sciencedirect.com/science/article/pii/S2666954422000084

How Can You Manage Your Business’s Budget Better in 2024?

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StrategyDriven Managing Your Finances Article | How Can You Manage Your Business’s Budget Better in 2024?

Although you might excel at managing your employees and overseeing the creation of new products, as a business leader, it can be much harder to cope with your start-up’s budget and ensure that your company and its expenses stay within it. This is especially the case if you do not have a background in finance. If improving your budget management is on your list of goals for 2024, read on.

Hire an Accountant

If you believe that you cannot possibly manage your budget alone and you are afraid of the situation remaining the same, you should consider outsourcing the financial aspects of your business. By hiring an accountant, you will be able to better understand your expenses and whether you are staying within the limits of the budget that you established within your business plan, and outsourcing your finances can save your staff time and your company money. This accountant will also be able to fulfill services such as preparing for the end of the tax year. However, when looking for an accountant, you need to ensure they are trustworthy and well-reviewed. You might even ask other entrepreneurs to recommend one with which you can build a good relationship.

Use an Accounting App

Are you struggling to stay within your business’s budget and yet are reluctant to outsource? If this is the case, you should consider downloading an accounting app. These apps have been specially designed to give businesses power over their own finances, no matter how much knowledge they have of financial processes. By downloading an accounting app, you might be able to make financial projections that can inform your future budget and track the amount of money going in and out of your business in a few clicks. This will ensure that you are never clueless about how much money you have to spend each month.

Hire a Finance Team

Rather than trying to complete every task alone, you should make sure that you can rely on a team of skilled employees who have the best interests of your business at heart. By establishing a finance team within your business, you will be able to ensure that your business’s cash flow runs smoothly without you having to oversee it. This delegation will leave you free to work on the elements of managing your company that you excel in and that you went into business for in the first place.

Review Your Budget

If you are nervous about what 2024 will mean for your business’s finances, the first step that you should take, though, is to review your budget, which you might have originally thought about many years ago. By reviewing your budget, you will garner a better idea of where you stand and will ensure that your current budget still works for your company and its situation. This will mean that, if you stick to your budget, there is unlikely to be any issues with money for your company in the coming year.

Tips for Working With Professional Construction Accounting Firms

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StrategyDriven Managing Your Finances Article | Tips for Working With Professional Construction Accounting Firms

Construction companies need reliable financial reporting to track expenses, recognize revenue, and manage cash flow. A general bookkeeper or inexperienced CPA must address this.

The right accounting firm will understand the unique challenges of construction accounting. They will use their industry knowledge to help you optimize your finances and prepare for growth.

Experience

The best construction accounting firms have vast experience managing these clients’ unique financial management needs. Developing deep domain expertise in the construction industry allows them to offer valuable value-added services like estimating and budgeting, project cost tracking, progress billing, and software implementation. Additionally, a firm that works closely with many construction firms understands specialized rules and regulations regarding job-costing methods, revenue recognition, and tax laws.

Professionals working with construction businesses have also mastered accrual accounting, which differs from cash accounting in that it records income when the company earns it rather than when it receives payment for the work. This helps construction companies keep track of their finances and make informed decisions about how to bid on projects, manage profit margins, and bill customers accurately.

An excellent CPA for construction firms can also help their clients prepare and file taxes, reducing their risk of audits, penalties, and fines. They can also advise on the latest changes to reporting standards and tax laws that may impact their clients’ business operations.

Expertise

It is essential to find a firm that understands the unique accounting requirements of construction firms. Construction bookkeeping is much more complex than traditional general accounting. It requires a specific approach incorporating software programs that allow workers in the field, business owners, and accountants to submit data on costing through a platform.

Additionally, construction accounting is project-centric. A construction firm needs a way to manage, categorize, and report transactions for each job to prepare taxes and ensure that service pricing is accurate. This is known as job costing.

Expertise is often considered a given talent, like Tiger Woods or Michael Jordan in sports, Albert Einstein in science, Wolfgang Amadeus Mozart in music, Bill Gates or Warren Buffett in business. However, research shows that expertise is not a given but a skill built through practice and experience. According to Hatano and Inagaki, experts develop their knowledge by seeking new problems, requiring them to apply different procedures and strategies. In addition, they seek out feedback on their work.

Fees

Accurate accounting is essential for bidding on projects, determining profitable ones, and billing clients accurately in the construction business. It can also help ensure compliance with regulatory requirements and industry best practices. A reputable CPA firm with intimate market knowledge can advise contractors on spending decisions, such as buying or leasing equipment.

Many companies offer a wide range of services beyond basic accounting. These might include budgeting and forecasting, cash flow management, risk management consulting, software implementation for job costing and project tracking, and dispute resolution with subcontractors or suppliers.

Specialized accounting for the construction industry can address unique challenges arising from time-consuming tasks like work-in-progress reports, calculating overhead, and using technical tax elections. A seasoned accounting professional can also advise on strategies to minimize tax liability and maximize deductions, including deducting mileage for travel to and from job sites. This is important because a company’s ability to take advantage of tax deductions can significantly impact its bottom line.

Reputation

Reputation is more than “what you know” or “what others think.” It includes all the aspects of a business that are not readily visible. This consists of the ability to work effectively with clients, partners, and other stakeholders in the industry. The construction accounting firm you choose should be able to build and maintain an appropriate reputation in your local market.

Having a CPA who is well-versed in the unique complexities of construction accounting and is actively engaged with a wide range of clients is essential for addressing issues that arise. They can help ensure your company is compliant, avoids costly practices, and maximizes its financial processes and growth potential.

For example, the right firm will have expertise in state and local taxes (SALT) and how they affect your costs. They will also be aware of new accounting pronouncements and their impact on the way you recognize revenue and lease obligations. They can help you develop cost allocation strategies consistent with your business model and optimize tax reporting. They can also help you implement a software program to make job costing much more accessible and ensure the information is available to your employees and accounting partners.

Personality

The right personality is essential to the success of a CPA firm. While most firms can answer the basic questions, such as “How often do you meet?” and “What are your fees?”, the best ones can distinguish themselves by displaying an extroverted nature, superior communication skills, comfort with public speaking, and other traits. Moreover, it’s important to note that every business is different and requires unique daily operations. For example, contractors must stagger their recognition of income to avoid pushing themselves into a higher tax bracket in a good year. An accounting firm can help in achieving this by providing strategic advice.

5 Ways to Finance a Car: Their Pros and Cons Compared

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StrategyDriven Managing Your Finances Article | 5 Ways to Finance a Car: Their Pros and Cons Compared

Whether you’re buying a new or used car, you’ll quickly find that they are more expensive than ever before. To make reliable transportation affordable, most buyers turn to some type of financing. If you’re not paying cash, you’ll want to look for the lowest auto loan rates you can find.

1. Traditional Auto Loans

If you have decent credit and a down payment, you can get a traditional auto loan. If you make your payments on time, these loans will improve your credit score. But, the best way to get a good interest rate and decent term is to already have good credit. The financing team at your local dealership will run your credit score to build a loan that fits your budget and needs.

Pros:

  • Affordable monthly payments when terms are extended beyond 48 months
  • Help your credit score

Cons:

  • Short-term loans will have high payments
  • Interest rates increase if you have poor credit

2. Auto Lease

If you’re shopping for a new car and you want a low monthly payment, choose a lease. These function like long-term rentals usually with terms between 12 months and 36 months. At the end of the lease you’ll have to return the car or buy it. All leases have mileage limits and exceeding them can be costly.

Pros:

  • Affordable monthly payments
  • You’ll always have a manufacturer’s warranty

Cons:

  • Mileage limits
  • Plenty of fees

3. Pay With a Credit Card

If you are buying a used car and you have plenty of space on your credit card, you can buy a car with it. The auto industry has limits to the total you can put on your credit card, but if you have more than one, you can spread out the payment.

Pros:

  • You don’t need a credit check
  • Easy way to buy a car

Cons:

  • Crazy-high interest rates
  • Can max out your credit cars for extended time periods

4. Get a Personal Loan

Consumers who don’t want to deal with automotive financing can ask for a personal loan from their local bank or another lender. You might already have a line of credit at your bank, and you can use it for car purchases or anything else you’d like. It’s an easy way to buy a car, but beware of defaults, especially if the line of credit is attached to collateral like your home or another high-end asset.

Pros:

  • No credit check required
  • Easy way to purchase any expensive item

Cons:

  • Can tie-up your personal loan or line-of-credit if you don’t pay it off quickly.
  • Possible higher interest rate than an auto loan
  • Could be tied to your home or other assets

5. Hire Purchase with 10% Down

This unique auto loan is a good choice for people with poor credit. When you finance a car this way, the car is the security for the loan. You put about 10% down, then make your monthly payments. At the end of the loan, you’ll own the car. This differs from a traditional auto loan where you can sell the car before you pay it off, as long as you pay off what you owe on the loan.

Pros:

  • Affordable financing for people with poor credit
  • Easy way to drive off the lot with a new car

Cons:

  • Stringent requirements
  • Easy repossessions
  • Difficult to change the contract

The Role of Due Diligence in Business Transactions

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Strategydriven Managing Your Finances Article | The Role of Due Diligence in Business Transactions

Due diligence involves reviewing information thoroughly before a transaction takes place. This process can last weeks or months.

There are two types of due diligence. Hard DD investigates data and facts, including legal structures, ownership, securities laws compliance, stockholder agreements, insurance information, and regulations. The other, soft DD, investigates the human element of an acquisition, such as culture and leadership.

Legal Issues

Companies must conduct thorough due diligence before committing to business transactions, as you would only buy a house by checking its foundations, plumbing, and other internal components. It’s a way to verify a deal’s critical aspects and uncover potential hidden costs, risks, or liabilities that could spell disaster for the transaction.

Legal due diligence involves reviewing contracts, agreements, and other documentation to understand the company’s legal status and ensure no significant issues arise after a merger or acquisition. It is vital for businesses that operate in highly regulated industries.

In-depth due diligence evaluates technology, operations, and regulatory risk to help investors like Zack Schuch assess terms and valuation more accurately. It also looks into culture and people to determine if current employees will accept a change in their working environment. Additionally, it can assist them in identifying problems that could make a transaction impracticable or alter their interest in it.

Commercial Issues

Specific commercial issues need attention during due diligence, depending on the deal type. For example, a buyer might want to evaluate a target entity’s financial and operational details and verify its reported information’s accuracy. They may also need to investigate how the target is structured and whether it complies with local tax laws.

In addition, buyers should conduct thorough commercial due diligence before closing the deal by reviewing material customer contracts and other commercial arrangements that could be affected by a transaction. They should also diligence the target regulatory compliance history to ensure that a transaction won’t violate antitrust and foreign investment rules.

Performing due diligence requires time and resources, but it can safeguard businesses from potentially costly mistakes and provide a path toward profitable decisions. Using the right tools and processes, M&A professionals can maximize efficiencies, generate valuable insights, and ensure outcomes that benefit all parties involved.

Valuation Issues

Buyers such as CEO Zack Schuch will examine the financial standing of the firm they are trying to purchase during due diligence. It aids in assessing whether the purchase price fits their investment criteria and is reasonable for the aim. A thorough examination can uncover assets and hidden liabilities that could influence the price.

The process must also uncover potential risks that could make a deal risky or unprofitable, such as undisclosed debt, legal disputes, or inefficient operations. This information informs the decision-making process and can help avoid costly mistakes.

Performing due diligence requires time and resources, but it can be crucial in making an informed business transaction. With verified information and risk assessments, buyers can feel confident that their acquisition will succeed. Otherwise, they might be forced to walk away from a lucrative opportunity. Alternatively, expertly honed due diligence can help them find ways to mitigate the risks and achieve their desired outcomes. That makes it a vital tool in any business transaction.

Financial Issues

In the financial sphere, due diligence is an essential tool that helps ensure that the numbers pan out. It also clarifies the risks of a particular transaction and allows companies to make informed decisions.

For example, during financial due diligence on a company to be acquired, an acquirer might uncover that the business is highly dependent on a few critical clients for revenue (an issue that would fall under commercial due diligence). In this case, it may be necessary to renegotiate a price to reflect the high risk or create a strategic plan for diversifying customer relationships post-acquisition.

In addition, in the case of M&A transactions, due diligence will uncover many issues related to contracts, liabilities, pending or potential lawsuits, and other legal matters that can affect how a deal is structured and completed. A legal team often does this type of due diligence. But it may also be conducted by a board committee, which can bring additional expertise.