Finance Transformation in focus: how to deliver added value in 2021

Finance Transformation in focus: how to deliver added value in 2021

January 11th, 2021

Finance Transformation in focus: how to deliver added value in 2021

To deal with the continuing COVID-19 fallout, the pressure is on CFOs to shape business strategies for survival, stabilisation and recovery. So, are businesses equipped to handle what lies ahead? A year ago, strategic transformation of the finance department was something to aspire to; in 2021, it is business-critical.

COVID-19: the great transformation accelerator

Has COVID changed anything fundamentally? Arguably, when we look at things like the fall of high street names and the rise of flexible working, a more accurate assessment is that the pandemic has accelerated trends that were present already.

This certainly applies to finance transformation. Long before COVID, the function of the finance department was shifting. Being a keeper of the books and an overseer of reports is no longer enough for any CFO. Businesses want a truth-teller, a first-responder and a course-corrector.

Above all, they want a value creator; a role that the vast majority of CFOs are more than happy to fill. Faced with continued workplace disruption and market uncertainty, the need for CFOs to take a major strategic role has never been greater. Trouble is, if you are grappling with day-to-day reporting, oversight and compliance requirements, there just isn’t enough time to focus on value-added
strategy.

This is where finance transformation comes in. We are not talking about adopting new tech for the sake of it. Rather, it’s about process, system and cultural change right across the organisation, with two key aims in focus:

  • Streamlining, simplifying and optimising existing processes. This frees up bandwidth, enabling you to expend fewer resources on transactional processing and reporting.
  • Increasing your decision-making capabilities. By leveraging your data and boosting your analytics capabilities, transformation enables the CFO to become a strategic business partner.

Research from Grant Thornton shows how the events of 2020 have inevitably led to increased pressure on senior finance executives to focus on strategy. But at the same time, 62% of businesses say that the COVID crisis has meant that finance transformation projects have had to be delayed.

It is unfortunate – albeit somewhat inevitable – that many businesses have had to step back from their transformation plans right at the time when the need for change is at its greatest. Right now, a workable, affordable strategy for transformation is essential: one where your business can reap the benefits from the outset. If this is your aim for 2021, then these are the areas to focus on…

Automation

Corporate finance teams spend an estimated 80 percent of their time on gathering, verifying and consolidating data. This leaves only about 20 percent for value-added tasks such as analysis and decision-making.

To transform your focus, you firstly need to redress this balance. Here’s a broad roadmap for achieving precisely that:

Carry out a resource audit. Simply put, this involves working out where all your department’s time goes. Common culprits include operational and regulatory reporting, requesting (and chasing up) data from various parts of the business, consolidation and reconciliation. These are the areas that are usually ripe for transformation via automation.

Look for ‘easy wins’. Deploying a transformative solution for a particular business problem does not always have to mean ditching the technology you have already. Let’s say, for instance, that your department is currently grappling with the recent rules changes relating to lease accounting and revenue recognition. Dedicated compliance solutions mean you can automate complex calculations, keep your general ledger up-to-date, and keep regulators at bay, thanks to a clear audit trail. Even better: with a best-in-class compliance solution, it is usually possible to reduce your reporting workload, without a complete overhaul of your existing accounting technology stack.

Explore your optimisation options. You are already invested heavily in financial management and accounting software. Despite this, your team still seems to be spending an inordinate amount of time on routine, transactional tasks. So what’s going wrong? Often, we find that there are certain business-specific processes that are creating the stumbling block.Through targeted help such as a custom automation solution designed specifically for the process (or even just through expert reconfiguration of user dashboards), we are able to make a huge difference.

Data analytics

Once you have freed up resources, you can focus on delivering strategic business support. This is where data analytics comes in. From setting realistic budgets through to identifying your organisation’s most profitable product lines, data analytics gives you the ability to answer key business questions – and to do so with confidence.

To enable effective transformation, your data analytics project needs to cover the following:

Integration. Business leaders will be looking for you to deliver the full picture on organisational performance. This is why you need to ensure that all relevant data is integrated from across the organisation.

Timely access to insights. In 2020, we saw just how quickly the market landscape can shift. When conditions are altering day-to-day, the idea of quarterly or even monthly budgets seems hopelessly out of date. In fact, one survey showed that when employees require data-based evidence to take action, just 3% have access to it. For 60% of staff, acquiring the data takes hours or days. For effective transformation, focus on solutions that deliver the ability to monitor performance and budgets in real time.

Forecasting and modelling. Faced with the need to make savings, should you make across-the-board cuts, or focus on specific departments? What will be the impact of an exchange rate shift, a supply line delay or a price increase? You need the ability to model “what if” scenarios with ease, to stress-test possible courses of action and reach evidence-based decisions.

Big Data and AI

In sectors as diverse as banking, logistics, manufacturing and retail (to name just a few), data is generated at every turn. Your business almost certainly has a growing number of devices, systems and applications in play. So how might this benefit the finance department?

It links back to the need for rapid insight. In particular, forward-thinking CFOs already recognise that if you want to provide business decision makers with the most up-to-date insights, you need the ability to capture data produced on the shop floor and beyond. Once harnessed, you need to be able to connect this data, analyse it, and translate it into insight.

‘Big Data’ analytics has the potential to deliver insight from across all operations, giving CFOs the potential to react quickly to rolling events and identify inefficiencies. So how do businesses put this capability to work? Here are the areas to focus on:

Data architecture and integration. To make use of large volumes of machine-level data, you need a ‘Big Data-friendly’ solution for extraction, migration and integration. Technologies such as Microsoft SQL Server Integration Services (SSIS) or Oracle Data Integrator provide the foundations for even the most complex data initiatives.

Advanced analytics and AI. With robotic speed, advanced analytics solutions incorporating artificial intelligence (AI) are able to mine vast amounts of data for insights, automatically recognise risks and flag up events, assess thousands of variables, spot problems and highlight opportunities.

What next?

For CFOs committed to adding extra value to their organisation in 2021, the three key questions to ask are as follows:

  • Do we have the potential to streamline routine processes and free up resources?
  • Can we deliver the right insights to the right people at the right time?
  • Are we making the most of the data that exists in the organisation for more accurate insights?

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Rules engine and subledger technology: what every CFO needs to know

Rules engine and subledger technology: what every CFO needs to know

November 24th, 2020

Transform your processes and liberate your finance team 

From revenue recognition through to the treatment of leases – not to mention a raft of sector-specific rules and standards, the compliance burden faced by CFOs is growing year by year. Managing it requires effective internal controls, auditability and of course 100% accuracy.

Added to this, the routine reporting workload remains as relentless as ever. Familiar tasks such as reconciliation and final report preparation continue to consume a huge amount of time. In fact, currently, 87% of finance professionals are still obliged to work overtime in the run-up to the financial close.

Expectations of the finance department are also changing. With high volumes of valuable data at their fingertips, there is growing pressure to put this data to work and to use it to generate solutions to business problems. CFOs themselves are keen to find new ways to add value to their organisations. The trouble is, without streamlining routine operations there is rarely time for finance to contribute more fully and help formulate corporate strategy.

A subledger system integrated with an accounting rules engine can help overcome this deficiency. With this type of technology, transactions can be stored, processed and posted automatically to the general ledger. For the finance department, this means less time spent on manual tasks, increased accuracy and greater compliance with standards. It also frees up internal resources, providing more time to focus upon added value tasks and strategy.

This guide aims to provide an insight into the use of subledger technology, its benefits to the CFO, how it can help address specific compliance requirements and what should be looked for in a subledger.

Part 1: Subledger technology explained

The general ledger is the foundation of a company’s accounting system. As a key reference point for the finance team and other business insiders, keeping it accurate and up-to-date is essential.

For any large organisation however, hundreds or even thousands of weekly accountable transactions are not unusual. Many will be straightforward, while others will need to be processed in a particular way to comply with internal policies and with general accounting principles and standards.

Manual processing of these transactions can be both resource-intensive and subject to error and therefore an automated subledger approach offers more efficient processing.

Key characteristics of subledger technology:

• The subledger provides a database for logging, storing and processing a subset of double entry accounting records.
• Subledgers can be set up for any areas of the general ledger e.g. accounts payable, accounts receivable, fixed assets, product inventory and purchasing etc.
• An automated system allows multiple subledgers to be connected to the general ledger.
• Transactions are automatically generated and posted to the general ledger.

Transactions however are not always straightforward and it’s not always enough to merely summarise a group of transactions and post them to the general ledger.

This is where a rules engine can help. A rules engine is essentially a software tool that automates the steps that make up a business process. With a subledger solution, you can apply specific rules to determine the way in which transactions are processed (before they are posted to the general ledger) to comply with all relevant accounting principles and standards, internal policies, as well as handling what can often be complex multi-entity, multi-currency calculations. Rules can be set and then applied to ensure transactions are processed correctly.

Part 2: The benefits provided by using a subledger

More effective use of time and resources

Especially in the current climate, businesses demand up-to-date insights and new ideas. From workforce and asset deployment through to analysis of product-line profitability, they need to drive efficiency and identify new commercial opportunities. In all these areas, the CFO has an important role to play.

However, if the finance department is spending time mainly on routine tasks such as transaction processing, reporting and compliance, then there simply isn’t the bandwidth to devote to adding value to the organisation. What can be automated to deliver greater efficiency? This is the key question to be addressed by any finance department seeking to become more strategy-focused.

PwC highlighted the fact that in areas such as management reporting, tax and general accounting, there’s the potential to free up between 30 and 40% of time by introducing automation and process efficiencies. By dramatically reducing the time needed for manual transaction entry and reconciliation, subledger technology goes a long way to help the finance department become a valuable and trusted partner to the business.

Greater consistency and fewer errors

Subledger technology allows transactional data to be processed and automatically posted to the general ledger according to pre-defined rules. With large organisations and groups, it’s especially easy for processing inconsistencies to arise. Through universal rules, processes are rationalised, eliminating manual-entry error and inconsistency, providing increased confidence in the integrity of the financial results.

Enhanced compliance and auditability

Regulations such as IFRS15, IFRS16, IFRS17 and LDTI require finance departments to ‘show their workings’; to have their underlying operational data available for disclosure in order to demonstrate adherence to regulatory standards. Using the right subledger solution, allows drill down to the general ledger at transactional level and provides a full audit trail. Likewise, the rules set for data processing and accounting are transparent and easily verifiable. In the event of any regulator queries a solid foundation for compliance can be easily demonstrated.

An up-to-date financial picture

During the current year, the COVID-19 pandemic has demonstrated how quickly market conditions and expectations can change. The general ledger provides the foundation not only for accounting, but also for rolling budgets and forecasts. To provide the most value, it needs to keep up with what’s happening on the ground. Subledger technology reduces the time and manual input required for transactions to be fed to the general ledger. It helps transform the general ledger from a periodically revised accounting tool into a reliable and up-to-date information asset.

Enabling analytics and generating insight

The subledger’s primary purpose is to allow automated processing and data feeds directly through to the general ledger. But the general ledger doesn’t need to be the only destination for this data. Depending on the specific rules set, the rules engine powering the subledger effectively cleanses transactional data and ensures that data from multiple sources is processed in a consistent manner.

This helps the creation of a ‘ledger-certified’ foundation not just for statutory accounts but also for management reporting and analytics. As well as connecting to the general ledger, a feed can be set up directly from the subledger to data analytics or business intelligence tools of choice.

Part 3: Compliance troubleshooting: Subledgers and accounting standards in focus

Here is a closer look at how subledger technology can help tackle the compliance challenges raised by specific accounting standards and principles.

IFRS 15

The challenge

The ‘revenue recognition’ standard determines how revenue should be recognised and reflected in an organisation’s financial statements and balance sheet. It sets out a standard five-step model for recognising revenue effectively. For high volumes of long-term contracts with multiple elements, there is a considerable challenge in making a distinction between the different elements in the contract, recognising revenue for each of them.

The solution

At what point should revenue from a particular contract be recognised within the profit and loss and balance sheet? A subledger with a suitably configured accounting rules engine can help manage data processing, calculations, reporting and an automatic feed to the general ledger, complete with a clear audit trail. This ensures that consistent revenue recognition policies are applied, keeping the general ledger up to date, while also providing the ability to drill down into individual contracts to check data regarding, for instance, contract balances, performance obligations and contract costs.

IFRS 16

The challenge

IFRS 16 marks a once in a generation shift in the categorisation, calculation and presentation of leases for financial reporting purposes. The most obvious impact concerns the layout of financial statements: specifically, a wide range of financial liabilities that were previously held off-balance sheet as operating leases must now be shown on the balance sheet.

Behind this presentational change, there’s a significant and ongoing data management challenge. As a start, you need to identify and classify all leases that come into play within the business. For the relevant calculations, data must be standardised – often filling in the gaps arising from incomplete information. It can prove particularly resource-heavy where the information needed is spread across different departments and formats and these is extensive reliance upon spreadsheets.

The solution

A dedicated lease accounting subledger helps ensure that all relevant leases are appropriately accounted for on the balance sheet. The lease subledger will also need to include sections covering areas such as discounting of future lease payments, ROU asset depreciation and liability amortisation. This information needs to be accessible when needed without the general ledger becoming cluttered by detailed entries for each lease.

A subledger solution preconfigured for IFRS 16, allows automation of complex calculations (e.g. asset depreciation and applicable interest). It also means that all relevant information such as changes in rates or terms, extensions, renewals or impairments can be easily managed, without the need for multiple data entries.

IFRS 17

The challenge

The stated aim of the new reporting standard for the insurance industry is to provide greater transparency concerning an insurers’ financial position, performance and risk exposure. For insurers on the ground, this means collating and processing potentially enormous amounts of additional data, such as historical policies and an increased number of calculations. Given the volumes of data involved, the complex interplay of different categories of actuarial and accounting data and the calculations required, the sole use of a general ledger for accounting becomes practically unsustainable.

The solution

What’s needed is a subledger and accounting rules engine specifically configured for IFRS 17 compliance. The standard requires regular recalculation of the performance of applicable insurance contracts over their lifetime. A subledger solution can allow this to be carried out automatically, giving the ability to store the calculation results at each measurement period – and provide a fully auditable data trail.

Part 4: Choosing a solution

Start with your specific problem. If you already using an enterprise resource planning (ERP) system such as SAP or Oracle then you are likely to find that it has a subledger component. A good example is the S/4 HANNA-based subledger for SAP which provides a ‘catch all’ solution aimed at handling the regulatory and reporting requirements for financial institutions, insurance companies and similar enterprises.

Such solutions may carry impressive functionality, but because they are designed to handle a range of compliance needs, they often demand a considerable degree of bespoke configuration for them to address the problems to be solved. If there is the need for a quick implementation with a minimum of technical input, an out-of-the-box subledger solution configured for specific compliance requirements may be a good option.

Examples include the IFRS 16 lease management solution provided by Legerity and the IFRS 17 insurance accounting subledger from Aptitude.

Aim for seamless integration

Adopting a subledger solution does not have to mean a complete overhaul of your existing technology stack. Millennium Consulting specialises in helping equip you with the type of subledger technology that addresses your specific requirements, while ensuring full integration with existing systems.

Supporting wider transformation initiatives

Compliance is often the primary driver of subledger adoption however organisations may require a more efficient system to handle the increased data processing and calculation burden that the new standard brings. A compliance challenge may also be the springboard to achieve additional business benefits. The subledger provides a way to harness potentially enormous volumes of granular data and provides the opportunity to consider how else this data may be put to work for the purposes of analysis, forecasting and delivering timely business insight.

What next?

Starting with your specific goals and operational and requirements, Millennium Consulting can help you implement best-of-breed subledger technology and processes. To keep on top of compliance, assign finance team resources to more profitable use and to build the foundations for stronger business insight, speak to Millennium Consulting today to discover how we can support you.

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Millennium Consulting Elite Partner of Unit4

Millennium Consulting Elite Partner of Unit4

November 3rd, 2020

Millennium Consulting has achieved Elite Partner status from Unit4.

The new Unit4 global partner program launched in June 2020 operates across three levels focused on capabilities, contributions, and customer satisfaction. Elite level partners have achieved the highest level within the Unit4 partner program.  This level is awarded to partners that have consistently demonstrated the ability to meet the highest level of success with Unit4 and our joint customers.

Partner levels are determined through product certification, client references, successful new business sales including SaaS, plus client feedback via Raven Intel which analyses recent Unit4 Financials implementations and associated support. Aspects such as customer satisfaction, team quality and performance, scope and precision in the implementation process are evaluated. Additionally, Unit4 evaluates whether each partner is a specialist in their respective market.

To date, there are only ten organisations with elite status globally (only three of them in the UK) and we are one of only two Unit4 Financials Elite Partners globally.

Malc Coton, Partner Manager UKI at Unit4 congratulated the Millennium team:

“Well done for achieving this in just over 4 months since programme launch, it’s quite an accolade and a badge to wear with pride for sure! It’s a huge milestone for Millennium in the UK and I’m proud to have been your Partner Manager on that journey with you.”

Beata Wright, Global Head of Partner Ecosystems at Unit4, successfully introduced the world class Global Partner Program to give partners the resources to transform the way people work and help their clients deliver an exceptional people experience to their customers. This program was part of the strategic concept of “People Experience”. Connecting and transforming all aspects of the work experience is key to personal inspiration and organisational success was a vision, from the champion of People Experience, Mike Ettling CEO of Unit4.

With Millennium, for 25 years, we have built a reputation for quality, value, and delivery. We provide global finance transformation and data management consulting, solutions, and services across the world’s most demanding industries, with customers in finance, logistics, construction, and manufacturing.

We call it the Millennium advantage…


Does your Chart of Accounts still fit your Organisations Reporting Requirements?

Does your Chart of Accounts still fit your Organisations Reporting Requirements?

October 23rd, 2020

Are you able to output the reports that your business requires straight from your Unit4 Financials system, without resorting to end user computing? If not, then your current Chart of Accounts design may no longer be fit for purpose.

In Unit4 Financials (U4F) the chart of accounts is not just a list of GL codes. It encompasses all of the accounting codes in your business including cost centres, projects, vat rates, customers, suppliers, employees, etc. and It does this through its element structure.

Your information is held in a specific location in its element structure. Through the flexible nature of this design users are able to produce any number of customised reports to reflect the state of their business. To make the most of this level of flexibility it is vital that your element structure is optimised to produce the correct information with minimal manual intervention.

As your business grows, the nature of the reporting requirements changes, and so your original chart of accounts may no longer be suitable to support this. Whilst most small businesses initially set up their accounting to meet GAAP and FRS requirements, they can often overlook the importance of having a robust Management accounting structure .

Management Accounting allows you to create the financial reporting that provides you with the information to manage your business. With a properly designed chart of accounts you can fulfil both your internal management accounting and statutory reporting.

Remodelling your chart of accounts can allow you to produce both your management and statutory reporting using standard Unit4 Financials Functionality, such as generic browse. It will also allow you to use more powerful analytical tools like metadata queries to produce more value-added reporting.

A properly designed Managerial Accounting chart of accounts will provide the following:

Here at Millennium Consulting, we can help you design a new chart of accounts and element structure within U4F to reflect your current business needs. Our skilled staff can undertake workshops to understand your organisational reporting needs and create an element structure and chart of accounts that will drive your business. To discuss further or arrange a workshop, please reply to this email.

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The future of the cloud: key trends in focus

The future of the cloud: key trends in focus

October 5th, 2020

With IT departments facing budget pressures, we might have expected cloud adoption plans to be put on ice. But in fact, the opposite has been the case. Recent trends have shown that financial constraints actually strengthen the case in favour of cloud migration.

Here’s a closer look at why, despite a challenging business landscape, cloud-based digital transformation has continued apace…

The cloud and business survival
Business continuity was the big priority in the first half of the year. As lockdowns took hold, firms needed new solutions for communication, collaboration, as well as remote access to business data and applications. Cloud-based services proved pivotal in ensuring operational continuity.

In its global cloud services overview, Canalys found that spending on cloud infrastructure services jumped 11 percent in Q2 2020 compared to the previous three months, and was up 30 percent year-on-year.

Fast forward to the autumn, and most firms have already covered the basics to adjust to remote working. So does this mean we are about to witness a dampening down on cloud adoption? It seems not.

COVID-19 has forced organisations to reassess their strategic priorities. KPMG, in its recent Enterprise Reboot report found that whereas the emphasis back in March was on continuity, “the immediate focus is now on survival”. Companies are investing in the areas where their cash is likely to have the biggest positive impact.

This includes investment in technologies that help companies maintain customer and stakeholder trust, to keep remote workforces connected, and to ensure that businesses are prepared for further disruptions.

Business decision making is another priority area. To compete, businesses need the ability to react quickly to changing circumstances, which means the ability to query data at speed is essential. On top of this, IT architecture must be compatible with increasingly demanding data analytics methods.

It means that more than ever, organisations need data warehousing solutions that are powerful, scalable, flexible and secure. This is precisely the type of environment that the cloud can offer. 38% of companies plan to increase their cloud spend this year (up from 31% last year). Small wonder that cloud adoption is continuing apace.

Slow adopters change their attitude
Some sectors have been markedly more reluctant than others to embrace the cloud. Factors holding organisations back include regulatory compliance rules (especially over data storage), nervousness over data security, and fears over reliability and data availability.

The banking sector was traditionally seen more cautious than most when it came to the cloud. Now though, things are changing. As a couple of high profile examples, AWS has recently agreed a multi-year partnership with HSBC, while Google Cloud has linked up with Deutsche Bank. For the banks, the emphasis is on modernising their architecture, increasing their data analytics capabilities and creating a more personalised customer experience.

So what is driving the change of mind? Money plays a big part. Whether you’re a global bank or an SME, it’s often the case that switching to the cloud is a cheaper way to scale up your capacity and capabilities, compared to trying to overhaul your on-premise legacy architecture.

It’s also the case that the cloud itself has evolved. For instance, improved container technology makes it much easier to deploy multiple cloud providers as back up, significantly reducing the chances of an outage. On the security front, there’s also the realisation that tapping into the cyber security expertise of the likes of AWS, Google and Microsoft is likely to be a safer bet than relying solely on in-house security capabilities. As fears over reliability and security are reduced, the case in favour of the cloud becomes impossible to ignore.

Achieving success and managing expectations in 2020 and beyond
The cloud promises a lot. But organisations need to realise that cloud migration is not necessarily a quick fix for whatever challenges they happen to be facing.

A reminder of this came in a recent survey of 350 companies by security vendors Fortinet and supply chain specialists, IHS Markit. Of the respondents, 74% had migrated at least one asset into the cloud, only to later move it back into their on-premise infrastructure. The two top reasons for the reversal, cited by 52% of respondents, were performance and security.

Organisations migrate their data and applications to the cloud for a wide variety of reasons. For instance, it could be to support wider business transformation initiatives, to boost your storage capacity, to facilitate wider systems access, to reduce your IT spend – or a combination of all of these and more.

These days, with resources under pressure, it’s going to be more important than ever for businesses to take a planned, measured approach to cloud adoption. What do we expect from the cloud – and what do we want to do when we get there? Only once you have articulated this can you define the performance levels you need – and hone in on the specific cloud solutions you need in order to reach them.

Why Millennium Consulting?

Our cloud migration expertise – combined with innovative tools for data cleansing, mapping and reconciliation – ensure that your move to the cloud is as efficient and effective as possible.

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Looking for help with a move to the cloud? Submit your details and one of our experts will be in touch.


Millennium Million Step Challenge

Millennium Million Step Challenge

October 1st, 2020

Please support us with this worthwhile initiative! You are invited to take part in the Millennium Million Step Challenge to help us reach our combined overall target of 100 million steps by the end of the year whilst raising £10,000 for UK charity Shelter UK.

The COVID-19 pandemic has reduced funds raised by most charities this year and we expect that UK homeless people will be particularly affected this coming winter. We are now asking volunteers to support us by taking part in the Million Step Challenge to raise funds at the Millennium Million Step Challenge “Shelter” Just Giving page.

Download the ‘Move Spring’ app and join our challenge using this link: https://app.movespring.com/signup/confirm-organization and connect your fitness tracking device.

We have set a deadline of Sunday 13th December 2020 – join us today and you’ll need to walk an average of 13,700 steps per day to reach 1 million (73 days!) Walking 20,000 steps per day will take 50 days. The app will record yours and overall group steps so progress can be tracked towards the overall target of 100 million steps.

Ask your friends and families to sponsor you at our Just Giving page and/or also take part.


Millennium Consulting Recognised as Unit4 Financials Top Partner

Millennium Consulting Recognised as Unit4 Financials Top Partner

August 5th, 2020

Last month (June 2020) Unit4 announced a partnership with Raven Intel, an independent review site allowing customers to share feedback and experience.

Millennium Consulting are delighted to report we have been recognised as the top Financials Partner; receiving the most reviews – twenty one positive reviews to date, with a near-perfect score of 4.8/5.

For 25 years, we have built a reputation for quality, value and delivery. We provide global solutions and services across the world’s most demanding industries, with customers in finance, logistics, construction and manufacturing.

We call it the Millennium advantage…

Read our reviews

VAT News: MTD ‘Digital Links’ Deadline Extended to 1 April 2021

VAT News: MTD ‘Digital Links’ Deadline Extended to 1 April 2021

May 6th, 2020

Does your business still need to get its VAT accounts 100% digitally linked? If so, HMRC has announced some welcome breathing space.

The ‘soft landing period’ for Making Tax Digital (MTD) for VAT was due to come to an end on 31 March 2020, but has now been extended by a year. It means that all businesses have until their first VAT return period starting on or after 1 April 2021 to put full digital links in place.

Here’s a closer look at the scope of this extension, the broader requirements of MTD – and at how to make sure you stay on the right side of the rules.

Making Tax Digital: A Quick Overview

First announced in the 2015 Spring Budget, MTD is the government’s initiative for modernising the UK’s business tax framework. It’s aim is to make tax admin more effective, efficient, and fairer.

The plan, ultimately, is to bring all business taxes under the MTD umbrella. It’s an ambitious project, involving a fundamental shift from paper to digital record keeping, and from annual to quarterly reporting. To ensure compliance, it requires businesses to reassess both their reporting procedures and the accounting tools they currently have in place.

VAT has been the first area of focus in the plan. As from April 2019, the vast majority of VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) are now covered by the MTD framework.

Software requirements for MTD

Businesses caught by MTD are required to shift their VAT accounting to “functional compatible software”. In short, the software must be capable of storing and maintaining the organisation’s VAT records. It must enable the preparation of VAT returns using the information maintained in those records. It must also be capable of linking up with HMRC digitally through HMRC’s own API platform.

But what happens if your accounting processes involve more than one software application? Or what if you use spreadsheets for your accounting?

Where data is scattered across more than one location or systems, you can still be MTD-compliant, so long as you have a digital link in place for transferral of the data.

What is a digital link?

HMRC rules specify that in order to be compliant with MTD rules, a digital link must have two characteristics:

  • Data must be transferred electronically between programs, products or applications.
  • The transfer must be automated. In other words, the process of transferring the data must not involve any manual intervention, such as copying and pasting it from a spreadsheet to another location.

What is the ‘soft landing’?

It is essentially a ‘grace period’, providing businesses with time to get their technology in order. So during the soft landing period only, if a company has not been able to set up complete and effective digital links between its various software programs, spreadsheets and locations, HMRC will accept the use of ‘cut and paste’ or ‘copy and paste’ as a digital link.

Businesses should still note, however, that even during this soft landing period, you still need to use MTD-compliant software for actually submitting your VAT return to HMRC.

How to become fully MTD compliant

Full automation of your VAT processes isn’t just essential for compliance purposes, it also makes perfect sense for your business. Not least, it helps reduce the time and resources you need to commit to VAT reporting, freeing up your finance team to focus on driving your business forward.

With our partners, Avalara, we offer a one-stop solution to automate all forms of VAT compliance in the UK, Europe and over 50 countries around the world. To join up your multiple systems, to stay compliant and to free up your resources, speak to Millennium Consulting today.

The current tax landscape – Brexit, MTD, COVID from Avalara: Automated Tax Software

Watch a presentation from Avalara as they take a look at the impact of recent events on businesses when it comes to tax compliance.

Presented live at The Millennium Consulting Unit4 Financials Global Virtual Conference in May 2020.


Budget 2020 and the government's support package: What it means for UK tech

Budget 2020 and the government’s support package: What it means for UK tech

March 1st, 2020

Rishi Sunak’s first Budget was remarkable for several reasons. The first was its sheer scale, including an estimated £30bn of coronavirus-related stimulus. The second was the speed at which the package was overtaken by events.

Less than a week after the Budget was delivered, the government announced a £350bn package of grants and loan guarantees designed to help see businesses through the crisis. Next came a scheme for the government to pay the wages of furloughed employees, followed by similar arrangements for the self-employed: spending commitments that are expected to top £75bn.

But alongside the headline announcements and the unprecedented support package that followed it, the Budget (and subsequent announcements) also contained a number of provisions directly relevant to the UK’s tech sector. Here’s a roundup of what you may have missed…

IR35 changes pushed back by one year

With independent contractors forming such a significant part of the UK’s tech sector workforce, the proposed changes to the off-payroll working legislation (IR35) has been a cause of considerable concern.

IR35 is meant to address the perceived problem of ‘disguised employment’, whereby workers operate notionally as independent contractors and bill for their services via an intermediary (usually a limited company), resulting in a lower tax and NI liability. However, Many tech firms routinely use contract labour to help de-risk their business models as a flexible way to plug temporary skills gaps.

Originally, changes to IR35 impacting large and medium-sized private sector organisations were due to come into force on 6 April 2020. These changes shift the responsibility for determining a worker’s employment status from the contractor to the hirer. It’s a big burden for many firms – and reports suggested that many employers and contractors were simply not prepared for it.

Welcome news came shortly after the Budget, when it was announced that these IR35 changes have been pushed back until April 2021. Be warned though: the Business Secretary, Steve Barclay made it clear that this decision was “a deferral, not a cancellation, and the government remains committed to reintroducing this policy”.

Rishi Sunak’s first Budget was remarkable for several reasons. The first was its sheer scale, including an estimated £30bn of coronavirus-related stimulus. The second was the speed at which the package was overtaken by events.

Less than a week after the Budget was delivered, the government announced a £350bn package of grants and loan guarantees designed to help see businesses through the crisis. Next came a scheme for the government to pay the wages of furloughed employees, followed by similar arrangements for the self-employed: spending commitments that are expected to top £75bn.

But alongside the headline announcements and the unprecedented support package that followed it, the Budget (and subsequent announcements) also contained a number of provisions directly relevant to the UK’s tech sector. Here’s a roundup of what you may have missed…

IR35 changes pushed back by one year

With independent contractors forming such a significant part of the UK’s tech sector workforce, the proposed changes to the off-payroll working legislation (IR35) has been a cause of considerable concern.

IR35 is meant to address the perceived problem of ‘disguised employment’, whereby workers operate notionally as independent contractors and bill for their services via an intermediary (usually a limited company), resulting in a lower tax and NI liability. However, Many tech firms routinely use contract labour to help de-risk their business models as a flexible way to plug temporary skills gaps.

Originally, changes to IR35 impacting large and medium-sized private sector organisations were due to come into force on 6 April 2020. These changes shift the responsibility for determining a worker’s employment status from the contractor to the hirer. It’s a big burden for many firms – and reports suggested that many employers and contractors were simply not prepared for it.

Welcome news came shortly after the Budget, when it was announced that these IR35 changes have been pushed back until April 2021. Be warned though: the Business Secretary, Steve Barclay made it clear that this decision was “a deferral, not a cancellation, and the government remains committed to reintroducing this policy”.


Is tech hiring about to get harder?

IR35 and the private sector: Is tech hiring about to get harder?

January 23rd, 2020

From April 2020, the government’s revised off-payroll working legislation (IR35) will apply to the private sector. By making the fee payer responsible for determining a worker’s employment status, these new rules represent a significant shift in liability from contractor to hirer. Already, a succession of big-name enterprises have phased out limited company contractors in favour of permanent hires. So should your business take a similar approach?

Here’s a closer look at what’s changed, and at what this means for your wider hiring strategy.

IR35: the new private sector rules

IR35 is HMRC’s answer to the perceived problem of “disguised employment”: arrangements akin to employment where workers bill for their services through an intermediary (usually their own personal services company) purely as a means of reducing their tax and NI liability. If the arrangement falls within IR35, HMRC will tax it along the same lines as a standard employment relationship.

In 2017, the IR35 rules covering the public sector were changed to shift two key responsibilities from the worker to the hirer. From 6 April 2020, similar rules will apply to the private sector.

Here are the two main changes:

  • Previously, contractors were required to determine and declare their own IR35 status. From April, this status determination becomes the responsibility of the organisation using the worker’s service (the ‘end user’).
  • If the arrangement falls within IR35, the organisation responsible for paying for the worker’s service (the ‘fee payer’) is responsible for calculating and deducting tax and NI through PAYE. The end user and fee payer will usually be the same party; one notable exception being agency hires where the agency is responsible for paying the worker’s fees.

Does the rule change apply to my company?

The new rules apply to medium and large employers, defined as follows:

Unincorporated bodies with a turnover of more than £10.2m.

Incorporated bodies (companies, LLPs, unregistered or overseas companies) where two of the following apply:

  • Annual turnover of more than £10.2m
  • Balance sheet total of more than £5.1m
  • More than 50 employees.

Where a parent company meets the threshold, the new rules will also apply to all subsidiaries.

Your recruitment model: questions to ask

If you currently engage meaningful numbers of contractors, now is the time to review both your existing arrangements and your wider hiring practices.

For some businesses, the nuclear approach may seem tempting: to bring all existing independent contractor arrangements to an end and offer to re-engage those contractors as permanent or fixed-term employees. This means automatically taking a hit in terms of employers’ NI, but it side-steps the need to evaluate the IR35 status of each and every contractor, and removes the risk of sleepwalking into non-compliance.

But does calling time on contractors actually make sense from a business perspective? Especially when it comes to bringing tech talent on board, the contract model is often a natural fit: it provides vital support for project delivery, it equips businesses to deal with fluctuations in demand, and helps to plug skills gaps – often at short notice. Rather than jettisoning the contract model completely, organisations should ask the following questions:

  • Which roles is there a business case for bringing in-house?
  • When, and under what circumstances is there a business case for hiring independent contractors?
  • For those contractors, how do we construct the arrangement to avoid IR35 liability?

Permanent recruitment: time to take stock

GlaxoSmithKline, IBM, Lloyds Bank, HSBC and Barclays have all opted to phase out the use of contractors operating through personal service companies, mostly offering to re-engage existing contractors on PAYE terms.

The bigger the organisation, the greater the likelihood of being able to take this type of blanket approach. As well as being able to absorb the cost of adding large numbers of staff to payroll, the typical multinational tends to have considerable leverage in the recruitment market – so, isolated gripes aside, persuading contractors to stay is less likely to be an issue.

But let’s say you are head of HR at a software house with 50+ permanent staff already, and a similar number of PSC contractors. Compared to a bluechip, the financial implications of adding large numbers of extra people to payroll at a stroke are likely to be much more significant. As an alternative, this may be a prime opportunity to take a wider view of your staffing strategy, review your operating model, to assess what skills you need to drive the business forward and to cut back on overlapping roles.

Will it be harder to recruit and retain after April?

In a word, probably: especially if you are forcing current workers and new hires to accept a status determination they are unhappy with.

Switching contractors to PAYE can reduce their income by as much as 25%. For one thing, salaries are taxed at a higher percentage rate than dividend payments through a PSC. They will also likely find themselves out of pocket for many of the expenses they were previously claiming.

On top of the financial benefits of operating through a PSC, many workers also appreciate the freedom and flexibility that the model offers. Try to force them onto payroll and they may be inclined to walk away. For instance, one survey suggests that 59% of contractors would consider working for someone else if they found themselves caught within IR35 in their current role.

Particularly in specialist, in-demand areas such as data science and AI, firms are going to have to balance HMRC compliance, the needs of the business and the commercial realities of the recruitment market.

For example, let’s say you have assessed your star data engineer’s existing contract as falling within IR35 and they are uncomfortable about the idea of being added to your firm’s payroll. If money is the main bugbear, is there scope for negotiating a higher rate? Alternatively, could you formulate the new, salaried role so it better aligns with this contractor’s career goals? Good communication is essential here: only when you understand a contractor’s specific concerns about their employment status can you start to address them.

Accessing the right help

It’s important to remember that IR35 was never meant to eliminate bona fide contract arrangements. It is possible to continue to engage contractors through intermediaries and keep the arrangement outside of IR35, provided that you keep the contractor effectively at arm’s length from your organisation, allow that contractor control over their working processes, ideally provide a right of substitution and do not insist on exclusivity.

Do you need help in formulating contractor roles to stay outside of the scope of IR35? Need a tried-and-tested way to access permanent/temporary staff in the fields of AI and data science? Speak to Millennium Consulting today.