International expansion: How CFOs can help businesses go global
International expansion is all the rage these days. It's seen as a Brexit tonic and a way to boost growth even in an insipid economy. But where to start? AccountingWEB's recent webcast 'CFOs going global' was filled with excellent advice on expanding overseas.
“Get your export documentation right now.” That’s Tim Amey’s advice for UK companies hoping to expand internationally, because when things go wrong it’s often paperwork that stands between you and getting the issue resolved.
Amey’s advice was recently featured on AccountingWEB’s webcast ‘CFOs going global: The challenges of international expansion’. He is the global financial controller for Western Global, a leading supplier of portable tanks and dispensing equipment for the safe storage and handling of fuels, lubricants, and other fluids.
His advice on documentation comes from a close call with an overseas supplier. “A few years ago, we had instance where we shipped goods to a South American country and the customer was unable to pay the duties to take the tanks out of the customs zone, and then we discovered they weren’t able to pay for the tanks,” said Amey.
“So we had a large order of tanks sat in the port. After a while, the port authorities will quarantine the stock and auction it. Then no one is getting it back. So for us to recoup it, we had to work without logistics agency and redo all the paperwork in our name so we could claim the shipment back. To clear customs, all the documents was in the customer’s name.
“Work with a good logistics agency and make sure you have all the export docs ready.”
It’s the sort of advice you might instinctively grasp about international expansion: choose the right partners, get your documents in order -- but it still catches people off guard. Simply because it can be overwhelming, managing a business across different territories.
“When companies start off in one country,” noted David Turner, a senior director at NetSuite, “you have relatively simple systems and processes. You have an accounting package, a CRM package, some operational systems because you’re in one country, in one jurisdiction. But as soon as you go international you add a layer of complexity.”
And this layer of complexity, a new layer added with every territory, catches even experienced businesses off guard. “I visited a retailer recently that operates in seven countries and they had different systems in each country.
“At month-end, the controller had to sit in a room with seven different PCs, running those systems and then manually consolidate. It took them 3-4 weeks to close the books which means they had no real opportunity to actually analyse the detail.
“In one of the countries particularly, the controller said, his level of confidence of the figures he was getting was within the tolerance of a million or a few million pounds.
For Amey, operating with a single system across the entire business is vital. “On my home screen, I have dashboards featuring the key information I’m monitoring. I can see every single sales order generated that day by the business. I then have a general idea where my revenue will be for this month and the month after.”
But how to get a footing in new territories to begin with? Amey advocated a distributor model. According to Amey, Western Global has 35 distributors and they were chosen because they already distribute products that are complementary. “So we can almost bundle our products in with that and you can suddenly get access to a new market. There’s no capital outlay, no compliance issues or payroll.”
Dealing with one distributor simplifies Amey’s life substantially. There’s one creditor at the end of the day, and he can rely on them to pay. Distributors have another benefit: it’s a good way to test the market. “That’s what we did in the US. That distributor proved so successful that we bought the business.”
Once you move into subsidiaries, matters become infinitely more complex. Each country, of course, has its own foibles, laws and unique brand of red tape. “We have a Polish subsidiary, for example, and Polish tax law is very prescriptive. If you’re signing a document, it has to be a blue pen not a black pen, or they won’t accept it and if you’re not compliant they can come down and close your facility.
“The other thing is live reporting requirements. Your ERP system needs to be connected with the government’s systems and if you don’t report within 24 hours you can get fined. In certain European countries, that’s the way they’re going. They’re much further ahead in terms of tax digitalisation, so get some good tax advisers.”
Adjacent to compliance issues are IP considerations. Amey led Western Global’s process of ensuring that its trademarks are registered in the countries it operates in. “We worked through an adviser and registered with the World Intellectual Property Organization (WIPO)
“But there are a few countries that aren’t a part of WIPO. A fair few in the Middle East, for instance. Outside of WIPO it can be quite costly.” IP is a necessity when expanding overseas, but what to trademark exactly?
“When you’re getting a trademark, go for the name not a design or logo because if you change the design, you need to re-register the trademark,” said Amey. “Your name gives you more longevity.”
Interested to know more about expanding internationally? Watch our on-demand webcast CFOs going global: The challenges of international expansion.