Overcoming the Top 5 AP Challenges of International Expansion
The decision to expand your business internationally can be a difficult one. The best way to approach this is by setting realistic goals and expectations, having an established plan of action, and staying on top of the account payable (AP) and account receivables (AR) challenges that come with international expansion.
In recent years, small business owners have been increasingly drawn to the globalization of their enterprises. In fact, a whopping 86% of entrepreneurs are likely to be interested in expanding internationally at some point during their careers.
But international expansion comes with its own set of challenges — and may even seem overwhelming for those who haven’t done it before.
This blog post includes information about five different common accounting challenges small businesses face when expanding internationally. These include currency conversion, repatriation taxes, tax authorities in other countries, managing multiple currencies for reporting purposes, and compliance regulations in other countries.
Let’s move to figure out some interesting facts and figures-
Interesting Statistics
In a recent study, EY found that 71 percent of CFOs say the complexity in changing compliance requirements affects their reporting effectiveness.
In this research, 56% also said they have 11 or more standards with which they must comply and use 11 systems for these reports illustrating just how complicated it can get when you’re faced with so many different rules from both local and international levels — not to mention all those hours spent trying to figure out what’s right!
It’s time to review how you can overcome AP challenges, read the full article here!
Overcoming the Top 5 AP Challenges of International Expansion
Companies that take on an international presence should do so with care. Expanding across borders comes at the risk of expensive mistakes and strained resources, not just financially but also in terms of human capital due to different cultural expectations from country to country around the world.
To make it work, though, companies must be able to adapt quickly if necessary because there’s no time like now!
1. Complicated Business Structures
It’s easy to get lost in the weeds when it comes to international business, but there are ways of simplifying your process. One option for an American company is opening a branch abroad and giving them responsibility for overall operations within that country or region while still accounting under U.S. standards; however, this may not be possible depending on where you’re looking to set up shop so instead, try using another approach like setting up subsidiaries who will follow local rules which can vary significantly based upon location- what some people call “regional offices” -and generating their financial statements just as any other small firm would do during start-ups phase before rolling everything together at.
An accounting solution specifically designed for companies with multiple legal entities is the best way to ensure that every transaction is posted in accordance with local and headquarters standards.
The benefits of consolidating data from subsidiaries across countries following different rules are not only time-consuming but also prone to reporting errors, so it makes sense why this would be your biggest challenge as an international business owner or manager!
Luckily there’s now software available like ABC Accounting which allows you to post every transaction on various books at once — saving both effort & money by centralizing all financial information under one roof (which can then be easily accessed via web-based reports).
2. Changing Exchange Rates
When entering a new market, companies can’t just rely on the national currency. That’s because they’re required by law in most countries, and it adds more uncertainty for financial processes when dealing with multiple currencies that constantly fluctuate throughout the day — meaning there could be an issue each time your company tries making sales internationally or even just trying to buy anything outside of their base (domestic) economy!
A company’s financial statements can be a crucial source of information, but they’re not always enough. Monthly updates from your manager on how things are going could help you make better decisions and reduce risk in the long run with less time spent converting data into common currencies for analysis — something that automates this process is what truly leads to timely insights; which lead towards success.
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3. Communication Barriers
One of the first hurdles you’ll encounter when expanding internationally is deciding how to interact with clients, personnel, and other stakeholders. People generally prefer to buy from companies that speak their language, so an English-only marketing strategy will limit growth while employees are also more comfortable using their native tongue, which tends to produce better results as well — this isn’t just about communications but applies equally to translating internal documents or ensuring technology tools can be used by all workers within your organization because these small compromises make a big difference over time.
Internal documents should be translated correctly, but accounting and other business systems should also support various languages.
This is because employees use a range of tools for their jobs which means it’s essential to make sure all these devices can communicate adequately in different languages!
4. Managing Compliance
Navigating the regulatory environment in a foreign country can be an exhausting experience. The roles of different government agencies often overlap, making it a challenge to know who is responsible for what.
Add this complexity with numerous legal statutes and banking regulations that specify how your company must operate — you begin to realize just how significant expansion is!
They say that the best way to avoid problems is by having local experts review your work for compliance. However, this can be expensive and time-consuming- so it’s not always an option when entering new markets, especially if you’re looking at smaller cities with limited resources that don’t have as many people in regulatory agencies making sure rules are being followed every day!
You could automate these inspections by embedding all necessary documentation into each application running through them (which means fewer manual searches).
5. Tax Rules
The recent passage of the U.S.’s 2017 Tax Cuts and Jobs Act has incentivized companies to expand internationally, but this is not without its challenges: changes in tax policies at home and abroad; navigating shifting economic conditions that put pressure on countries’ treasuries looking for new sources revenue; staying up-to-date with all these developments can be complex when you’re juggling so many responsibilities.
There are many challenges to dealing with taxation, including VAT and sales taxes. These can vary between countries or even at the local level in some cases; knowing which rules apply where you’re selling is confusing enough without having to worry about different rates as well!
Keeping up-to-date on these details takes spreadsheets that may not always be accurate either due to human error (human) or technological errors(tech).
Automating tax collection will make things far easier — it’s likely more so than manual methods ever could’ve been anyway!
Final Thoughts
Invoicera is an excellent accounts payable and receivable software that helps manage the challenges of multinational, multi-subsidiary companies. They do this by providing them with flexibility and intelligence to adapt their operations in any country they operate in while also tracking performance from local markets and headquarters levels so business leaders can improve results for themselves at all times.
Invoiceras’ cloud-based online invoicing services help overcome unique diversity issues faced when managing an international enterprise — such as tax rules or regulatory requirements, which vary depending on where you locate your office.
Being the AP and invoice specialist,it allows multi-entity companies to develop standard business processes and deploy them across the organization. Eliminate time-consuming and error-prone processes by automating compliance requirements for financial transactions like accounts payable invoices payments receivable reports that are needed to report results accurately without wasting too many valuable resources.
Are you looking for a free demo? Don’t hesitate to try a free demo of accounts payable software here-
Well! That’s it for today. If we miss to mention anything important, please share in comments below.
Thanks for reading!!
