Mar 022017
 
how are we using data in our business

Last week I wrote a piece for Fairfax Metro – the Sydney Morning Herald and Melbourne Age – looking at how government agencies and private credit companies are mining data.

That story sparked a range of interest with my doing a twenty minute segment on ABC Brisbane today on the topic which morphed into a deeper discussion on surveillance, particularly with the Australian government’s ‘metadata’ laws.

I’ll also be talking on ABC Radio Perth on Monday, March 6 about this story at 6.15am local time (9.15am Sydney and Melbourne).

In the wake of the Australian government’s Centrelink scandala national disgrace that is only getting worse – it’s worthwhile discussing exactly what data is being gathered and how it is being used.

The answer is almost everything with commercial operators like Experian pulling in data from sources ranging from credit card applications to social media services although store loyalty cards remain the richest information source.

As the Australian Tax Office spokesperson pointed out, none of this is particularly new as they have been collecting bank deposit data since the Federal government introduced income taxes in the 1930s.

The arrival of computers in 1960s changed the scale and scope of tax offices’ abilities to track citizens’ finances and gave rise to the major commercial credit bureaus.

With the explosion of personal electronics and internet connected devices in recent years along with increased surveillance powers being granted to government and private agencies, that monitoring is only going to grow.

The best citizens can expect is to have their data protected and respected with financial providers only using what is ethical and relevant in determining our access to banking and insurance products.

Politically the only way to ensure that is to make it clear through the ballot box, the question is do we care enough?

Jan 102016
 
A small business closing due to rent increase

One of the sad facts of business is that ventures go broke, and when they do there’s a trail of former customers, suppliers and employees that end up out of pocket.

The recent appointment of administrators to the recently listed Australian electronics retailer Dick Smith Holdings leaving thousands of gift card holder – including the writer of this blog – out of pocket is a good example of this.

Over twelve years of running a service business having customers go bust was a regular thing. Luckily this wasn’t frequent as once the assets had been liquidated and divided among creditors one was lucky to get five cents for every dollar owed.

Early warning signs

When a customer did go broke it was rarely unexpected. With long standing clients the payment times would blow out and often a business going bust showed the signs of poor maintenance, declining stock levels and distracted management long before the money ran out.

The other notable thing was the failing company’s staff were often on your side. At one company, a whisky broker that went under owing millions to creditors who’d effectively bought ‘time share’ in liquor, the receptionist insisted in paying for some of the work we’d done out of the petty cash.

Five years later the remaining outstanding invoices were settled and, as expected, we received almost nothing apart from the entertainment of reading the administrator’s reports detailing the struggles of angry creditors trying to get their drinking money back in the face of what had almost certainly been a scam.

Ethical proprietors

Most business owners that go broke aren’t crooks however, most are honest people who made bad decisions or were just plain unlucky. Often these people suffer far more than the creditors.

One pleasant experience we had with a failed customer was a dance studio on Sydney’s Lower North Shore. The business went broke, the proprietor fled to her native New Zealand and I resigned myself to never seeing the outstanding thousand dollars.

Two years later the formal liquidation proceedings had finished and unsurprisingly we received none of the monies owing. A few months after a cheque from the business owner arrived for the entire outstanding amount with a note apologising.

A tough life

While the former dance studio owner probably broke the rules in paying back the debts outside the official channels, she illustrated most failed business people are good people who were caught out by their own mistakes or being on the wrong side of lady luck.

Business failure for those running startups or smaller enterprises often comes at a high personal financial, mental and relationship cost so it’s not surprising those sinking trying to hold on later than they should and then take personal responsibilty for the damages they cause.

Sadly the same doesn’t hold true at the corporate level and in the case of Dick Smith Holdings the executives, the institutional shareholders frittering aways investors’ money, the private equity swashbucklers and the staid corporate managers responsible for the firm’s failure probably won’t see a hiccup to their stellar careers.

The moral for anyone in business remains never to be too exposed to any one creditor. Regardless of how well a client’s management means, when things go bad it’s unlikely you’ll see most of the money you’re owed.

Dec 172015
 

Earlier this week the Financial Times reported how the eleven biggest North American and European banks had shed 100,000 jobs this year, so it when I was asked to do a segment on the future of banking for radio station ABC666 in Canberra I was more than delighted.

The ABC producer’s interest had been piqued by an Ovum research paper detailing the IT spending of banks and their increasing focus on security.

Rethinking payments

In Ovum’s view much of the banking industry’s security  comes from the diverse range of payment options coming onto the marketplace. Another factor in the increased spend are the US credit cards moving to contactless payments.

Certainly the increased focus on payments security is being driven by the range of new devices with smartphones, wearable technologies and the Internet of Things opening up a whole new range of commercial channels. This is something driving the development of services like Apple’s and Google’s payment system and part of a wider battle over who controls those channels.

Underpinning much of the security focus is the interest in blockchain technologies which move the authentication records off central ledgers – historically one of the core functions of banking – onto a distributed network of databases.

Core challenges

That shift in record keeping is just one of changes affected the banking industry’s core functions, crowd funding and peer to peer lending threaten to displace banks from being the main providers of business capital, one of the fundamental reasons for the banking sectors existence.

It should be noted though the banks have largely stepped away from being the providers of small business capital over recent decades as the ill conceived ‘reforms’ of the 1980s and 90s saw the finance sector being more focused on housing lending and doing mega M&A deals with the big end of town.

The Financial Times report notes a decline in M&A deals is one of the drivers for the staff lay offs at the major banks, it’s notable that technology is changing that business function as much of the due diligence can be better done by artificial intelligence and algorithms rather than highly paid corporate lawyers and bankers.

Where have the bankers gone?

As the banks lay off senior staff, it’s notable many are finding their way to fintech companies. The Wall Street Journal however describes the relationship between incumbent banks and their would be disrupters as far more complex than it seems.

Increasingly banks are buying or taking stakes in promising startups along with establishing their own investment arms and running hackathons to identify potential disruptors. Many in the banking industry are quite aware of the changes happening.

That the banks are adopting the new technologies and identifying the threats shouldn’t be surprising, over the past fifty years the sector has been adept at applying technology from batch processing on mainframe computers through to deploying Automatic Teller Machines and rolling out credit cards to improve their business operations. Banking is one sector that’s proved itself fast to identify and adopt technological changes.

Are the banks going away?

So with fintech startups snapping at their heels, is it likely today’s banks are heading for extinction? Probably not suggests the CEO of fintech startup Currency Cloud, Mike Laven who describes such talk as being part of the “Level 39 bubble”, referring to the financial services startup hub based in London’s Canary Wharf.

Laven’s view is some banks will evolve while others won’t do so well and historically that’s what we’ve seen with other technological shifts – some of the incumbents adapt and reinvent themselves while others are not so adept and wither away.

Some of the bigger threats to banking may be social and economic change. Today’s rising of interest rates by the US Federal Reserve may mark the end of the last decade’s ‘free money’ mentality that’s been so profitable for them in recent times. The end of the consumerist era also challenges those financial institutions basing their business models on a never ending growth of consumer spending and household debt.

Almost certainly the banking industry is not going to vanish, however it is going to be a very different – most definitely a much leaner – beast in a few years time. What is certain though is the days of banks as we’ve known them in the second half of the Twentieth Century are undergoing dramatic change in the face of technological and social change.

Aug 242015
 

The accounting and professional services industries are uniquely positioned as the economy goes digital, while their own sectors are undergoing radical change so too are their clients.

Given the changes facing the accounting industry, the invitation to host last week’s CPA Australia Technology Accounting Forum‘s second day in Sydney was a good opportunity to see how the profession and its clients are dealing with major shifts in their industry.

The accounting profession has been one of the big winners of the Twentieth Century’s shift to a services economy. Last week’s story on how the workforce has been changing illustrates this with a chart showing how the occupation has grown over the past 140 years.

accountants-employed-the-uk

In many respects accountants should be well placed to benefit in a data driven economy given the training and skills they posses. The big challenge for existing practitioners is to shift with the times.

The transition from what’s been lucrative work in the past will be a challenge for some in the profession. Many of the manual tasks accountants previously did are now being automated with direct data links increasingly seeing operations like reconciliations and filing financial returns being done in real time without the need for any human intervention.

In private practice, the shift to cloud computing and direct APIs has stripped out more revenues with useful earners like selling boxed software petering away as services like Xero and Saasu arrived and established players like Intuit, Sage and MYOB moved to online models.

Shifting to the cloud

That shift has already happened with the presenter in one breakout session asking the audience how many practitioners used exclusively desktop software, purely cloud service or a hybrid of the two. Of the twenty in the room, the vast majority were using a combination with three being purely online and one sole operator still stuck with a desktop system.

For accountants the message from all of the sessions was clear; the future is online and businesses based around paper based models are doomed. The question though for them is how will they make the transition to being professional advisers.

Strangely, the big challenge for accountants in private practice may be their clients. A number of panel participants pointed out small business owners are slow to adopt new technologies and this holds both them and their service providers back. Divorcing tardy customers may be one of the more difficult tasks facing professional advisors.

The Technology, Accounting and Finance Forum showed the potential for accountants and professional services providers to be the trusted advisors in an online world, the task now is for practitioners and their clients to learn and understand those tools.

Aug 232015
 
businesses paying bills and invoices

Venture capital firm Andreessen Horowitz has a nifty sixteen point guide to evaluating a tech startup’s performance.

This is a handy checklist when looking at the claims of any business – big or small, tech startup or something more conventional.

Pre-booking of contract revenues in particular is one of my favourites and it’s something we’re going to see more of as the subscription economy becomes more widespread.

 

Jan 152015
 

The scale of the carnage Boko Haram has inflicted on remote parts of Nigeria is becoming more apparent every day and satellite imagery shows just how much damage the insurgent group is doing to communities in its territories.

Closer to home, Google’s Project ARA gets another outing, we look at how economies can deal with the jobless future, what a terrible aunt Ayn Rand was and how the IoT is going to sea.

The IoT goes to sea

At the CES show two weeks ago Ericsson launched their new maritime cloud service that promises to connect ocean going ships to the same services available on land

Google unveils more about Project Ara

Project Ara is Google’s attempt to reinvent the smartphone, the project came a little closer to completion with the company showing off some of its progress

Creating the innovation state

What do we do in a world where most people’s jobs have gone? Create an innovation state rather than a welfare state could be an answer suggests one economist.

The extent of Boko Haram’s massacres

Words fail to describe the horrors being visited on the people of Nigeria.

Ayn Rand was a terrible Aunty

What happened when one of Ayn Rand’s nieces asked aunty for a $25 loan?

Sep 222014
 

We’re past the time where business owners can dismiss new technologies as toys says Profitable Hospitality’s Ken Burgin.

Ken’s Profitable Hospitality website is a must read for anybody in the industry and I was lucky enough to be the the guest of his 99th podcast where we discussed payment systems, marketing and the challenges facing restaurant and cafe operators in a changing marketplace.

In the podcast we discuss PayPal’s plans for the retail sector along with how startups like Stripe look to disrupt the sector and what Apple’s announcements last week will mean to the payments industry.

The key message from the podcast is the entire sector is facing massive changes both from technology and changing consumer behaviour.

Like many other industries, the successful restaurant and cafe businesses over the next decade will be those who have the flexibility to adapt to a very different world.