May 19, 2020

BUSINESS BANKING: How to Manage Corporate Debt

Joel Cuttiford
4 min
BUSINESS BANKING: How to Manage Corporate Debt

Corporate debt can be a serious hurdle.  In fact, it’s so serious that companies value their capital structure based on how effectively they manage their debt.  In today’s economy, it can be difficult for businesses to emerge from the red, even when profits are improving.  Here are some of the most effective ways to manage corporate debt for security and growth. 

Revisit your budget.  If debt continues to pile up, then it is highly likely that the company’s current budget is not working.  Redesign your budget based on the business’s current financial situation.  Many companies fail to do this when faced with debt and continue to plan their year around outdated figures.  Be sure to devote a reasonable portion of the budget to variable costs, and when possible, pay off more than the minimum amount required for debt payments.

Prioritize your payments.  Handle the business’s highest interest rate debt first.  This generally equates to concentrating your efforts on paying down credit cards.  While you’re at it, be sure to review your current interest rates.  If the interest rates on your business loans are higher than current rates, consider refinancing.

Speak to creditors.  Financial advisors claim that it can’t hurt to address your financial situation with creditors.  Some may have a hardship plan in place that could provide better payment terms.  If one isn’t offered, request one.  But whatever debt reduction plan you agree to, be sure that you’re able to meet the terms.  The worst thing a business owner can do when in debt is to set up a reduced payment plan with a creditor and default.

Negotiate with suppliers.  Businesses everywhere are overpaying for their supplies, especially at the corporate level.  Encourage asset managers to approach suppliers for discounts, particularly those ordered in bulk.  Draw on past payment history or quotes from other suppliers when negotiating extended payment terms.  If that doesn’t lower costs, enlist a team or individual to find suppliers with better rates.

Rethink your office space.  If you are not utilizing all of the space within your building, consider subleasing unused space.  Entrepreneurs and startups are often looking for small spaces with inexpensive rates to set up shop.  Moves can be costly, but if it will save your company a considerable amount of money, it might be worth it.

Cut unnecessary costs.  A business needs to know exactly how it got itself into trouble in order to get out of it.  Identify the aspects of the business that led to the debt and eliminate the possibility of future accrual.  You can’t pay off your current debt if you’re acquiring more, so be additionally careful about further spending.  If your expenses are too high, take stock of those that are necessary and those that aren’t.  Another way to free up cash for debt payment is selling unused equipment.  Many businesses have office equipment collecting dust that is being kept for later use.  If your company doesn’t need it now, sell it.

Utilize creative and cost-free marketing.  Increasing your marketing—particularly through inexpensive means—can only help your business bring in more money when you need it the most.  Developing relationships with local media or joining organizations to enhance your networking are effective ways to expose your brand.  Social media has made this easy for businesses, and in these tech-heavy times, it is crucial for a business to have a strong presence in the social media sphere.

Meet with your banker.  Your banker has your company’s investments and interests at heart.  They can be a great resource for ideas to help your business.  Make an effort to familiarize your banker with your industry and discuss your financial goals or concerns with them.  Your banker can potentially facilitate introductions to vendors, suppliers and other contacts that may be of use to your business.  These introductions may be helpful during difficult economic times, when other businesses may be looking to pool resources.

Seek outside counsel.  If your business does not already have financial advisors that can help you strategize to reduce and pay off your debt, enlist the help of an organization that has the resources and expertise to assist you.  While small businesses qualify for help from non-profit organizations, larger companies often have to invest in financial counseling services.  Partners or affiliates may have access to services or resources that your company may not.

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Jun 8, 2021

Six issues at the top of tax and finance leaders’ agenda

Kate Birch
4 min
As businesses accelerate their transformation journeys, tax leaders are under increasing pressure to add strategic value. Deloitte reveals six tax trends

New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.

According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.

And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.

Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.

Trend 1: Businesses seek more strategic counsel from tax

Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.

According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”

Trend 2: Tipping point for resourcing models

Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.

Trend 3: Digital tax administration is moving faster than expected

in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.

"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."

Trend 4: Data simplification and lower-cost resourcing are top priorities

Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.

At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”

Trend 5: Skillsets are shifting

Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.

Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact 

Trend 6: 2020 brought productivity improvements

Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.

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