The Fintech revolution: How startups are changing the world of finance

Money

Category Archives: Money

The Fintech revolution: How startups are changing the world of finance


A new generation of financial technology startups are changing the world of finance in ways that were once considered unimaginable. They’re making it easier for businesses to manage their investments using artificial intelligence, transfer funds across borders in less time and help clients raise funds using robo-advisors.

Follow the money

It’s not hard to see why financial technology startups are growing in popularity. This year, they’ve managed to raise $8 billion globally, close 469 deals and push six startups into “unicorn” status.

#Fintech startups won’t put banks out of business anytime soon, but they’re growing in influence.

In years past, most financial institutions focused on partnering with emerging startups in order to better leverage their expertise. Although, all that that may soon change.

As the industry continues to innovate, traditional firms are concentrating less on strategic partners and more on outright acquisitions. This allows them to better integrate new technology into their workforce. It also prevents competing companies from benefiting from that same technology.

The revolution behind the scenes

More institutions are seeing how beneficial acquiring startup technology can be for the bottom line.

A 2016 report by IDC and SAP found a quarter of global banks were interested in buying a fintech company. By 2017, Pricewaterhouse discovered that a whopping 50 per cent of surveyed companies planned on purchasing a startup.

Some of the more notable acquisitions made just this year include JP Morgan’s purchase of online payment service WePay for around $220 million and Moneyfarm’s purchase of online advice service Ernest for an undisclosed amount.

So, what’s driving this change? Money, of course.

The same report found that acquisitions increase adoption rates and make it easier to integrate necessary technology. “By adopting one of the many solutions brought by innovators, Financial Institutions can gain incremental returns and find a way to expand new products and services and reach new customers.”

To hear more from BusinessCast, hosted by Robert Gold, make sure to visit our official iTunes page.

Why your startup needs an accountant

It’s easy to understand why early-stage entrepreneurs might see hiring an accountant as unnecessary. Tight profit margins, little-to-no investment and a small working staff mean even the tiniest expense can make or break a company. However, an accountant’s job is about more than just filing taxes and crunching numbers.

A dedicated accountant is like a year-round business partner. It’s a lifeline for entrepreneurs during the bad times and reassuring one during the good ones. Considering almost half of all new businesses fail in their first year, bringing on experienced financial assistance is less of a luxury and more of a necessity.

Avoid scam artists. Pick a professional

 
David Silber, a Senior Tax Manager at Crowe Soberman, has spent the last seven years working with investors, startups and small businesses across Canada. He’s seen how easy it can be for entrepreneurs to mismanage their company into trouble and out of a money.  

“Entrepreneurs are very good at looking at the big picture,” Silber explains. “However, they can lose sight of the fact that there are some financial reporting and obligations that go along with running a business that they can’t afford to ignore.”

Canadians convicted of tax evasion face five years in jail and a 200% fine on owed taxes

Mac Killoran, a partner at Fruitman Kates LLP, agrees. Startups tend to ignore how crucial professional planning is and don’t always understand why it sets them up for success down the road, he says. “I would say entrepreneurs for the most part try to reduce upfront costs and not pay professionals. When they do it on their own, it often results in penalties and larger headaches resolving the issues with CRA.”

Find resources you can afford

 
In a perfect world, every entrepreneur should have enough money set aside to pay a professional bookkeeper. But, since reality rarely works out as planned, a smart backup plan is to consider online accounting tools, like QuickBooks.

This helps businesses stay on top of their financial responsibilities in the interim, so they don’t rely on faulty memory or overworked staff.

If you can’t afford an accountant, online software will help you track expenses and payroll

 

It’s also important to separate personal and business expenses from the very beginning when starting a business. Founders that commingle the two can end up costing themselves money or garnering unwanted attention from the Canada Revenue Agency.

“If you can borrow money from your corporation, even unintentionally, there’s a rule in place that if that debt isn’t repaid within one year the money is added to your income and gets taxed the following year,” he explains. “Just don’t do it.”

Paying yourself a salary

 
Whether or not you should draw a salary during your startup’s early years is a question
that has plagued even the most frugal founders. Should company leaders pay themselves a salary when bootstrapping or focus on reinvesting that money? The answer, like everything in business, is complicated.

According to the experts, it all depends on a company’s future goals and cash flow. For Silber, he suggests entrepreneurs first recognize what their priorities are and then decide whether drawing a salary hurts or helps in the long run. A good compensation plan may be to pay a mix of salary and dividends.

Not taking a salary while bootstrapping your company isn’t always the smartest thing to do

Startups that pay into a dividend benefit in two ways. First: They lower their tax bracket so they pay less tax at the end of the year. Second: Later, when their business is doing well they’re not bumped up to a higher tax range. “What I do is tell entrepreneurs to pay a dividend of $30,000 or $40,000 for their salary, which results in less tax,” explains Killoran.

The future is up to you

 
The world of business is tough.

The hard truth is that every year hundreds of startups across the country shut down and
close up shop. It makes sense for entrepreneurs to use every tool they have at their disposal to tilt the odds in their favour. It might just be that an accountant’s experience and money knowhow may be the one factor that helps
their company thrive and survive in today’s cut-throat economy.

Looking to boost your money knowledge? Check out our previous post about the best money podcasts to listen to online.

The top 4 money podcasts every startup should listen to

Cash. Dough. Moolah. Money.

No matter what you call it, everyone wants it or is desperately trying to find a way to hold on to it. For entrepreneurs, a hefty serving of money can be the thin line that separates success from abject failure. Unfortunately getting (and staying) rich isn’t so easy and something people have been desperately trying to figure out for years.

Here’s a list of the best business podcasts that focus on money. They cover everything from money management to investor relations and the ins and outs of proper budgeting, so entrepreneurs can keep their company financially healthy.

Mostly Money With Preet Banerjee

 
The title says it all. This podcast will teach you everything you need to know about basic financial literacy. Whether it’s the best ways to organize expenses or budget for day-to-day finances, this program has it all.

If the name Banerjee seems familiar to you it’s because you’ve probably seen his name in print before. The TEDx speaker is a financial columnist for the Globe and Mail, money expert for the W Network and best-selling author behind a series of self-help books. If you’re interested in a money podcast that covers a wide range of issues then this show is for you. Head over here for the all the latest episodes.

Being Boss

 
Being Boss is a podcast designed with women entrepreneurs in mind. The show looks at ways entrepreneurs not only how to create great products, but continue “making bank” while doing it. The brainchildren behind this show — Emily Thompson and Kathleen Shannon — cover a wide range of topics like personal finance and money management. Although, not everything is strictly money-related. The duo cover other related topics, like the best strategies entrepreneurs can employ for finding new hires.

Bonus: These bosses put an emphasis on interviewing female innovators, so you’re sure to hear from some of the best women in the industry. Grab a coffee and listen to every episode on iTunes right now.

BusinessCast

 
Running a successful company is about more than just attracting the right investors. Robert Gold — a chartered accountant and host of BusinessCast — knows that better than most. Gold has spent 10 years interviewing some of Canada’s most innovative and successful entrepreneurs about their secrets for success. This program is more than just a look at run-of-the-mill finance problems. It also examines how companies should deal with the competition in a crowded tech market.

Engaging guests detail their struggles, journey to success and what it takes to maintain a competitive edge. With podcasts being on average only 15 minutes, it’s an easy, commitment-free way to learn something new while on the go. Check them out online here.

Entrepreneur on Fire

 
Entrepreneur on Fire is a must-listen for founders looking for fast and dirty tales about money pitfalls and successes. In every episode host John Lee Dumas features one new guest who details their money woes or wins and shares advice about what they’ve learned.

While sometimes their tips are a little too U.S.-focused there’s still great overall lessons to be learned. Listen to it here.

 

How Toronto startup Roofr is using tech to go global

Not too long ago GTA homeowners hoping to repair a faulty roof had very few options available to them. They could either scour online want ads to find contractors or reach out to one of the big pricey construction firms that dominate the industry.

A huge endeavour considering the Ontario roofing industry is projected to reach a whopping $800 million this year. Meanwhile a Mckinsey & Company report found the construction and home renovation industry is one of the few remaining industries lagging when it comes to adopting new technology.

In 2016 all that changed when cofounder Richard Nelson and his two partners, Kevin Redman and Zach Melo, created Roofr. The Toronto-based startup makes it easy for consumers to find local, vetted contractors in as little as 30 seconds.

Fixing the industry’s flaws

 
The startup’s satellite technology gets customers access to cost predictions that analyze everything from man hours needed to materials required on site. This also helps roofers provide the best quotes and takes all the guesswork out of costly renovations. Customers can use the site for free any time, while contractors pay Roofr a nominal fee after each job.

A roofer by trade since he was 12 years old, he saw first hand how the out-of-date the industry was costing consumers money.  

“The problem with the roofing industry… [is] that it was a complete disaster,” Nelson explains. “You have the large roofing companies charging an arm and leg, or companies that weren’t experienced providing inferior services for a lot of money. We get around that by connecting people to the best sellers at the most competitive price.”

Since launching, the team has managed to turn their cost-efficient-roofing startup into a thriving business. Recently it hit $200,000 in gross merchandising volume and now boasts a 50 per cent month over month growth rate.

First Canada, next the world

 
Right now the company’s services are open only to Ontario residents. However Nelson hopes to expand south of the border in the coming weeks. Once the team wraps up their residency at California-based accelerator Y Combinator they’ll drum up business for their American operations. “Within the next five years, we’ll be present in every city in North America. Our first market and primary focus [right now] is California.”

When asked about the company’s recent wins, Nelson is quick to praise the DMZ. The Toronto accelerator prepped the team ahead of their Y combinator interview and introduced them to investors that kept the business afloat in its early years.

“Laith [the DMZ’s investor liaison] introduced me to a bunch of investors and angels with office hours when we were in Toronto,” says Nelson. “They helped us practice leading up to our Y Combinator interview too. So we were really prepared and knew what to expect.”