Developing a successful company is not an easy job. Even the entrepreneurs believe that the company has the ability to expand in the world market when they initially start locally. The next growth of a company is its international expansion. While entering new markets is a good opportunity, it can be devastating. The success of a company is a tedious task as they implement a new business. People should learn the challenges and implement new strategies to beat these challenges.
How to Manage an International Business?
International expansion involves several risks that may directly impact the company. There is not only financial risk, there are also risks on the basis of human capital. For this to work, companies need to be able to comply with different business laws and cultural expectations. These include:
• Complexities in the Business Structure
International expansion is a major enterprise that can take months to complete. Even simpler approaches, like opening a branch office instead of a subsidiary structure helps safeguard the parent company from any liabilities. However, this further complicates the accounting process. As a separate business, the subsidiary is required to comply with local accounting regulations and prepare its own financial statements. These statements are then submitted to the parent company where they follow different accounting standards.
Gathering data from affiliates in different countries and following different regulations require more time and effort to close the books and leads to errors. Companies can reap benefits from an accounting solution that is developed for companies having multiple legal entities. This solution simplifies the accounting process and helps to list different transactions to multiple accounting books at the same time. In addition, it also verifies that the company meets the right standards at levels of the company.
• Language as a Barrier
Deciding how you want to communicate with customers, employees, and other partners is the first challenge you will face when expanding internationally. English- only marketing reduces the expansion of the company as people usually opt for the companies that speak their language. Employees are more comfortable and more productive with their mother tongue. However, this is not just communication. This also affects all the tools that people utilize to get their job done. Therefore, in addition to ensuring that internal documents are properly translated, accounting and other business systems must support multiple languages.
• Exchange Rate Volatility
Companies are expected to use national currencies in their business while entering a new market. However, this is not convenient for local business partners. In most countries, it is legal . Dealing with multiple currencies increases the risks, uncertainties, and complexity of economic processes. Exchange rates fluctuate continuously throughout the day. This means that the value of international sales fluctuates compared to the company's base currency.
It is significant to realise the effect of these differences on income. The monthly financial statements produce the results only. To know more about exchange rate fluctuations, managers require timely updates. Converting financial data for analysis into a common currency requires more time and is completely a manual process. Automating currency conversions with the latest exchange rates creates more time-bound insights, leading to better results.
• Tax Codes
Companies expanding internationally need to adapt to different tax policies at different places. As governments seek ways to increase revenues, pressure on countries to raise taxes is likely to continue in changing economic conditions. Dealing with indirect taxes, including VAT, sales, and usage tax, is especially challenging when entering a new market. Tax laws and rates vary from country to country at the local levels and in many other circumstances.
Knowing when to collect these taxes, which apply to rates, can be confusing and more difficult when selling in more markets. Remembering these details, we can confirm that information entered is accurate with the help of a spreadsheet. The convenient and most efficient way is to automate tax collection.
There are confusions on the responsibilities of various government agencies, as their roles overlap each other. Add to that the myriad legal rules, banking regulations, and other regulations that specify how to do that business, and you will begin to understand how big an international expansion can actually be.
Compliance is a major problem faced by companies while moving on to a new market. It is difficult to understand the rules accurately, which may cause heavy fines or other penalties. It helps to gain local expertise to ensure compliance is complied with. However, the best option is to automatically embed those rules in the software which you utilize to manage the business.
NetSuite #1 Cloud ERP
NetSuite helps multinational and multi-subsidiaries to meet the unique challenge of managing a global business, allowing them to adapt to currency fluctuations, tax regulations, and regulatory requirements. Netsuite is a cloud-based platform that enables business leaders at all levels to gain the real-time performance of their business. In addition, NetSuite provides access to all their data to make informed decisions and analyze their business.
With NetSuite, multi-unit companies can develop standardized business processes and deploy them throughout the organization, ensuring stability wherever you work. Additionally, NetSuite reduces the time consumption and errors by automating compliance with FASB, IFRS, SOX, and other financial requirements. NetSuite also provides real-time access to all the operations of the business and generates reports for analyzing the company’s growth and making informed decisions.
Do you want to easily implement your business in the global market? Implement NetSuite with the help of an Oracle NetSuite partner. Jobin & Jismi is an Oracle NetSuite partner with the expertise of more than 9 years. Contact us for any NetSuite-related queries.