Expanding your business internationally is an exciting endeavor, but it comes with its fair share of accounting challenges. Managing finances across borders can be difficult due to differences in tax legislation and currencies. However, with the right tools and strategies, you can easily manage these challenges. Let us look at how leveraging NetSuite Cloud ERP, especially with the help of an Oracle NetSuite partner, can be the key to overcoming the accounting hurdles of international expansion.
How to Manage an International Business?
International expansion involves several risks that may directly impact the company. There is not only financial risk, but there are also risks based on human capital. For this to work, companies need to be able to comply with different business laws and cultural expectations.
• 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, help 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 requires 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 in multiple accounting books at the same time. In addition, it also verifies that the company meets the right standards at the 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 realize 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 rate create more time-bound insights, leading to better results.
• Tax Codes
Companies expanding internationally need to adapt to different tax policies in 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 (Value-Added Tax), 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.
Confusion often arises due to the overlapping responsibilities of various government agencies. 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.
Understanding ERP and its Role in International Expansion
• Enterprise Resource Planning (ERP) is a comprehensive software solution that integrates and manages core business processes, including finance, supply chain, and human resources. For businesses eyeing international growth, ERP acts as a strategic enabler by providing a unified platform to simplify operations. With ERP, businesses can consolidate financial data, automate processes, and ensure compliance, laying a solid foundation for international success.
• How ERP Facilitates Global Growth: ERP systems play a pivotal role in international expansion by offering a centralized hub for managing diverse operations. It standardizes processes, enhances collaboration, and provides real-time insights, fostering agility and adaptability. This not only accelerates decision-making but also allows businesses to respond quickly to market dynamics, a crucial factor for success in the global arena.
• Cloud ERP Benefits in International Expansion: Cloud-based ERP solutions, such as NetSuite, bring added advantages to businesses venturing into international markets. Cloud ERP offers the flexibility to access data and applications from anywhere, facilitating seamless collaboration across geographies. The scalability of cloud ERP ensures that as your business expands, the system can effortlessly grow with it, eliminating the need for extensive IT infrastructure investments. Additionally, the cloud enhances data security and reliability, crucial factors when navigating the complexities of international business environments.
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. As a cloud-based platform, NetSuite empowers business leaders at all levels to access real-time insights into their company's performance.
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.
Looking to smoothly integrate your business into the global market? Partner with Jobin & Jismi, an experienced Oracle NetSuite partner with over a decade of expertise, to Implement NetSuite effortlessly. Feel free to reach out for any inquiries related to NetSuite.