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In the Headlines-March 27th, 2015

In The Headlines

People Analytics: Big Data or Big Brother?

Startups VoloMetrix and Culture Amp think there is a more scientific way to manage employee productivity and performance. Quantifying employee productivity is usually a rather qualitative, subjective exercise. But apparently, a person’s electronic calendar and email behavior can speak volumes about his or her impact across an organization.

By examining this data in aggregate, for example, one manufacturing company discovered some of its junior managers spent more than 30 hours every week “managing up” with reports to senior executives or in status meetings. Bottom line: that left just 10 hours of time for “real” work for the host, not to mention the ripple effect across their own teams. “You can quickly see the ‘load’ senior executives are imposing, as well as the social graph of who else is affected,” said Ryan Fuller, Co-founder of VoloMetrix, which sells software for measuring all this. Using that insight, the manufacturer embraced a policy of fewer meetings. VoloMetrix sends status updates that remind people to stay true to that policy.

Welcome to the brave new world of “people analytics,” which uses time management data to help companies understand the relationships—external and internal—driving corporate decision-making. “Once a company understands the behaviors that correlate to success, they can measure them,” Fuller said. VoloMetrix, which has raised $17 million in venture financing (including a $12 million round last fall), counts several dozen large companies including Boeing, Facebook, Genentech, Qualcomm, Seagate, and Symantec among its official customer references.

Many of these organizations use the technology to tame meeting overload. Some also use it to examine how the habits of high-performing sales representatives differ from others. “There are real behavior differences between great performers and average performers,” Fuller suggested. “For example, the best ones might have engaged with 10 more contacts at each customer.” You will not be surprised to hear that VoloMetrix can pull in data from Salesforce.com to help with this.
The privacy implications of what VoloMetrix is trying to do are pretty weighty. That is one reason the company recently hired former Microsoft privacy strategist, Peter Cullen, to guide its path. Right now, reports are anonymized. Individuals can see metrics such as time spent with their manager or time spent managing email versus other employees. But they cannot see what others are doing, specifically.

Another company talking up this space is Culture Amp, used by the likes of Airbnb, Box, Etsy, GoDaddy, Jawbone, and dozens of other technology disruptors. Culture Amp develops snapshots of employee engagement using surveys that are analyzed for trends over time. The Australian company raised $6.3 million in Series A funding earlier this month, led by Felicis Ventures, Index Ventures, and Blackbird Ventures. “We are excited to back them because there is nothing more important than retaining and motivating key talent at every successful company now,” said Aydin Senkut, Founder and Managing Director at Felicis.

Google is perhaps the most visible example of using analytics to shape just about every decision driving “people operations.” It has used insights for everything from reducing the number of interviews required to hire someone to lengthening its maternity leave to reduce attrition. Apparently, more businesses are getting ready to embrace that example.

Online Payment Processors Aim to Eliminate Paper Checks

While consumers keep making more of their daily finances digital—from online banking to Apple Pay—many U.S. companies remain wedded to paper. The typical American pays 35% of their bills with checks, but most businesses complete more than half their transactions that way, according to researcher Crone Consulting. The federal government, banks, and the largest companies have invested in the servers, software, and staff needed to make transactions more efficient. Smaller businesses have held off, but there are signs that reluctance is starting to change.

Between preparation, approvals, postage, and the costs of dealing with occasional fraud, a business has to spend $5 to $25 to issue a paper check, compared with $1 to $2 for the same payment made electronically, estimates Crone. In the past few years the European Union and governments in Latin America have begun to require or encourage businesses to switch to digital invoices. There has been no such pressure in the U.S., which accounts for two-thirds of the 22 billion checks written each year, according to Celent Research. “The U.S. is 20 to 30 years behind other countries in moving away from paper,” says Celent analyst Gareth Lodge.

The domestic market for business-focused digital payment software and services grew 10% in 2014 and will gain another 10% to reach $10 billion this year, Crone estimates. The growth is driven by a slew of Web-based programs designed to mesh with existing accounting systems in a business without pricey servers or other gear. There has been a rush of acquisitions and new investment as well. “We see a huge opportunity in business-to-business (B2B) payments because they are so far behind the times,” says Drew Hofler, Senior Director of Financial Solutions for SAP subsidiary Ariba. The company’s business-focused software AribaPay has processed $5 billion in payments since it launched a year ago.

In September printer maker and business services company Lexmark International bought online payment processor ReadSoft. In February, Bill.com doubled the $50 million in venture capital it had raised since its 2006 founding, while processor First Data led an $11 million round of investment in cloud rival MineralTree. So far no company has more than 5% of the market, says Henry Ijams, Managing Director at industry consultant PayStream Advisors. Bill.com Chief Executive Officer Rene Lacerte says his company may consider going public as early as 2017.

The companies have a wide range of business models. AvidXchange signs up individual businesses directly; ACI Worldwide, Basware, and Bill.com do the same, but also sell their processing services through client banks. Some charge fees per transaction, others based on monthly transaction volume. All the cloud programs are designed to link with clients’ accounting and business software, such as QuickBooks and NetSuite, and work electronically with a company’s suppliers, vendors, and banks. AvidXchange says its cloud setup works with about 100 kinds of software. Earlier electronic payment systems would force bookkeepers to record checks and invoices at least twice if the programs used by the company were incompatible.

Using cloud-based software, an accountant can send a QuickBooks entry to managers for digital approvals, record the transaction in all ledgers, and send payment out automatically for processing. The result: Fewer employees have to deal with payments. “We are probably now up to two, three accounts payable people that we saved,” says Jim Cook, Chief Finance Officer at Mozilla, which uses Bill.com. “And we are saving our managers a ton of time, providing an audit trail and time stamps online.” Electronic systems also provide a level of detail that a simple check does not. Businesses often issue one check to cover 100 different invoices. Online transactions can itemize the charges. Some new programs can check for errors as well. AribaPay lets users establish dozens of rules on discounts based on order size and other factors and flags an invoice if a purchase order doesn’t match the final charge. Some payment software makers offer extra features to distinguish their products from the competition. ACI Worldwide lets users supplement invoices with videos, and they can embed personal messages in their PDFs. Basware is expanding an online marketplace that lets companies sell their invoices to debt collectors. CEO Esa Tihilä says it will soon offer loans as well. His company takes an undisclosed cut of each transaction.

Most cloud companies encrypt their data. Still, recent corporate hacking scandals will keep some companies away from online transactions for years if not forever, says John Barlow, who runs market research firm Barlow Research Associates. “You just look at the news, and there’s Target and Home Depot and JPMorgan,” he says. “That scares a lot of people. … They know how to protect themselves with a paper check.” Hacking fears notwithstanding, competition among online payment processors is not likely to get any less fierce in the near future, because the industry’s profit margins reach as high as 50%, says consultant Ijams. Celent’s Lodge says the billions of U.S. transactions still done on paper every year are a powerful incentive for payment processors to deliver the hard sell, even if they are angling to convert only 1% of check users. “There’s a huge untapped market out there,” Lodge believes.

1. http://for.tn/1ExVbiE – Fortune
2. http://bloom.bg/1EzLXT1 – BusinessWeek

The Good News Is . . .

• Foreclosure activity in the United States fell last month to the lowest rate in nearly nine years as banks started the process on fewer homes and scheduled fewer auctions than in the previous month, according to industry firm RealtyTrac. A total of 101,938 properties across the United States were at some stage of the foreclosure process, which includes foreclosure notices, scheduled auctions, and bank repossessions. That drove overall foreclosure activity down 4.3% from January and down 9.4% from the same time last year.

• Nike, Inc., the world’s leading designer, marketer, and distributor of athletic footwear, apparel, equipment, and accessories for sports and fitness activities, reported earnings of $0.89 per share, an increase of 17.1% over year-ago earnings of $0.76. The firm’s earnings topped the consensus estimate of analysts by $0.05. The company reported revenues of $7.5 billion, an increase of 7.0%. Management attributed the company’s results to strong demand for Nike brands and gross margin expansion.

• Holcim and Lafarge, the two largest European cement giants, have agreed to merge and said they would aim to close the $46 billion deal this summer. The combination of Holcim, based in Jona, Switzerland, and Lafarge, based in Paris, would form the world’s largest cement and construction materials company. They had joint sales last year of around $33 billion and a total of about 131,000 employees worldwide. Holcim’s has a deeper footprint in places like India and the United States, while Lafarge’s focus is on Africa and the Middle East.

1. http://bit.ly/1EzM292 – RealtyTrac
2. http://www.cnbc.com/id/18080780/ – CNBC
3. http://swoo.sh/1GE1gfP – Nike, Inc.
4. http://nyti.ms/1AXqfXP – NY Times Dealbook

Planning Tips

Tips for Things to Do to Prepare for a Rise in Interest Rates

The Federal Reserve Board has recently signaled its intention to raise short term interest rates, perhaps as early as this summer. While there are many variables that can affect their decision, it seems likely that the strengthening U.S. economy will provide them with the rationale to do so in the near future. Below are some strategies you can use to help prepare for a rise in interest rates. It is a good idea to consult with your financial advisor when considering any change to your financial plan or strategy.

Pay down credit card debt – Most credit cards on the market have variable rates, so expect rates to rise in tandem. Ahead of the rate rise, it is a good idea to put any extra cash—for example your tax refund—toward paying down that high-rate credit card debt. Start with your highest-rate card first. Doing so will help minimize interest charges and knock out the debt faster. Also snap up zero-percent balance transfer offers sooner rather than later, as these may vanish once the Federal Reserve raises rates.

Refinance your mortgage – If you are thinking about refinancing, now is the time to proceed. Fixed mortgage rates are still historically low, and that is not likely to persist the closer the Fed comes to raising short-term interest rates. That also applies to fixed-rate home equity loans, whose rates are also likely to rise.

Go to shorter maturities on CDs and similar savings instruments – Before the Fed raises rates, avoid locking cash into any long-term certificate of deposit. Rates that are high now will not be as favorable in a few months compared to other options. If you are already locked in, check the terms. It can still be beneficial to break the CD early and pay a penalty of one to two months’ interest to secure a higher rate.

Consider trading in your car lease – Drivers with six months or less left on a lease would be smart to consider trading in ahead of a Fed rate rise. Interest rates play into lease terms, even though drivers are borrowing the car rather than cash. Dealerships will often let you end a lease a few months early, to lock you into a new contract on a new vehicle.

Restructure your portfolio – If you are in retirement, consider laddering your bonds or keeping terms short so you can take advantage of rising rates as the bonds mature. With respect to stocks, you may want to consider these strategies:

• Finding low-risk equity substitutes for bonds
• Picking equities of companies that will benefit from higher rates
• Avoiding companies with high debt, or look for those with fixed-rate debt and ability to pass on inflationary price increases

1. http://bit.ly/1xLVDXU – US News & World Report
2. http://bit.ly/1nXD6sv – Investopedia
3. http://www.cnbc.com/id/102516094/page/1 – CNBC
4. http://aol.it/18Pb3EL – Daily Finance
5. http://bit.ly/1FORysB – SeekingAlpha.com

Please don’t hesitate to give us a call if you need help with any component of your financial planning.

In the Headlines-April 3rd, 2015
In the Headlines-March 20th, 2015

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Avery Wealth, Inc.
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