While international expansion is challenging for finance departments and always subject to financial, political and regulatory uncertainties, back-office technology has evolved to support international expansion, streamline operations and keep pace with changing banking systems and tax regulations.
Technology can help an organization scale internationally and help finance departments shift their focus from managing the details of supplier payment processing to delivering valuable guidance to the business.
Expanding globally offers many opportunities for organizations to win new customers, increase revenue and market share, and expand their supply chain. However, there are also risks impacting finance departments, such as a looming trade war with China, Brexit, currency exchange rate fluctuations, regulatory changes and compliance with existing tax laws.
A recent “Going Global” survey from Censuswide and Tipalti, published in June 2018, revealed the challenges that over 500 decision-makers at midsize businesses in the U.S. are facing when expanding their company’s supply chain or geographic presence internationally. The survey also revealed how finance departments are addressing the challenges.
Top of the list of concerns about going global is uncertainty around trade. For example, 69% of respondents are concerned about trade disputes between the U.S. and China, and 71% are concerned about renegotiation of international trade agreements such as the North American Free Trade Agreement.
Although the European Union’s General Data Protection Regulation has already gone into effect, 76% of respondents think their organization isn’t ready to be compliant with GDPR and that it will delay their expansion into Europe.
Another source of uncertainty for Europe is Brexit. Although it’s been two years since the U.K. voted to leave the European Union, 61% of respondents are concerned about the impact Brexit could have on their businesses if they pursue international expansion into Europe.
Beyond global uncertainties, only 12% think their organization is qualified to successfully address necessary aspects of global expansion. The aspects of global expansion that respondents think their organizations are least qualified to successfully address include: knowledge of local markets (34%), different tax codes (32%), foreign exchange volatility (32%), hiring to support international expansion (31%), compliance and regulatory risk (30%) and macroeconomic and political risk (22%).
An astonishing 97% of those surveyed currently face significant concerns regarding their global supply chain. Top concerns for expanding supply chains internationally include avoiding tax and regulatory compliance penalties (34%), and paying vendors in different countries and currencies (27%).
It’s unsurprising that compliance and vendor payments rank high as concerns, as getting payments right is critical to developing a successful supply side of a business. Partners and suppliers will stop working with a business if there are payment issues, putting the supply chain at risk. Another recent Tipalti study, "Global Online Marketplace and Gig Economy Payment Satisfaction," found that 74% of gig workers would leave a marketplace because of payment issues.
The “Going Global” survey found that organizations are making changes to successfully scale internationally and overcome the above concerns. Fifty-seven percent of respondents are using technology that will more easily enable their international growth, while 51% are engaging vendors that have the capability to work smoothly in new markets.
Forty-one percent of respondents are planning to establish back-office operations around international realities to keep pace with international expansion. The most effective finance teams streamline back-office operations to spend less time focusing on payment errors and processes and more time partnering with other areas of the business to deliver greater value, such as by optimizing working capital and helping the company scale globally more efficiently.