Brought to you by
World First logo

International business payments made easy

Share this content

Accounting advisory services: Preparing clients for international expansion strategies

6th Jul 2022
Brought to you by
World First logo

International business payments made easy

Share this content

Accounting advisory services play a vital role in preparing business leaders for international expansion strategies. Discover the KPIs accounts teams need to track to measure a brand’s readiness to expand into new markets.

Global_expansion

As an accountant, you play a fundamental role in keeping businesses financially afloat. You ensure that your clients’ books are flawlessly maintained and act as the conduit between them and HMRC. But your accounting advisory services can also be a key player in helping entrepreneurs determine the right time to start planning international expansion strategies. 

Monitoring the financial ‘health’ of your client’s company is an exciting task. Your sound advice can be the source of inspiration that spurs your clients on to becoming industry leaders or even global household names. 

This article will offer tips to accounting advisory teams about preparing their clients for international expansion strategies

worldfirst_iX_banner

Financial key performance indicators

Sales teams are acutely aware of their targets, but the number of sales they need to make over a set period only gives them a glimpse of their company’s financial success. In the accounts office, you and your accounting advisory services team are privy to so much more information. You will see data about a company’s operational costs, how much debt it has, how tight its profit margins are, and so on. 

You have all of the financial data because you have your own set of key performance indicators (KPIs) to monitor at all times. KPIs are measurements of success alongside a business owner’s goals for the brand. 

An entrepreneur can tell their sales team to ‘sell sell sell’ at all times, while you might be asked to ‘save save save’. In many instances, it is better to keep KPI measurements separate between departments, to maintain effective operations across the business. 

There are many accounting-related KPIs, most of which fall into these five main categories. 

  • Profitability: Measures that show how profitable a company is — e.g. gross profit, net profit. 
  • Liquidity: KPIs that demonstrate how fast assets are sold and converted into ready cash — e.g. current ratio, working capital. 
  • Efficiency: Financial indicators that show how quickly a company completes its buying cycle — e.g. inventory turnover and accounts receivable turnover. 
  • Valuation: Figures relating to a company’s worth, including earnings per share and price-to-earnings ratio.
  • Leverage: Measures of company debt versus equity — e.g. debt-to-equity ratio.

It is up to accounts teams to collect and analyse data on the mentioned financial KPIs, as part of their duties to comply with UK business legislation. However, if you want to go above and beyond, KPIs can also aid in preparing your clients for growth in new markets. 

KPIs to monitor international expansion strategies

Expanding to new markets could incur significant financial risk. So, there are many variables CFOs will need to consider before they can sign off on new international expansion strategies. The four main areas where KPIs should be in great shape include:

Efficiency

Your accounts should show that your stock has an optimal turnover rate for expansion. Your indicators will need to prove that your supply chain is fast and efficient in reducing waste and bottlenecks. You may precisely measure (amongst other financial KPIs) things like: 

  • Inventory turnover
  • Days inventory outstanding 
  • Cash conversion cycle
  • Selling, general and administrative ratio

Profitability

Look for indicators that your client’s business maximises sales targets over a sustained period and increases company equity. You could measure KPIs such as:

  • Net profit margin 
  • Gross profit margin 
  • Return on sales 
  • Sales growth rate

Financial health

A business’s overall financial health should show a good balance between debt and equity before it can be deemed ‘ready’ to expand to new markets. Failure to reduce existing credit risk by optimising debt levels may see any international expansion plans fall flat quickly. Check on the following financial KPIs to determine a brand’s preparedness: 

  • Current accounts payable ratio
  • Current accounts receivable ratio
  • Days payable outstanding
  • Quick ratio

Resilience

CFOs will need to verify that their accounts show good resilience in the face of financial risk. Accounts teams should have strategies in place to service debts effectively and collaborate with operations teams to create optimised trade terms for fast receipts. To coordinate these activities, your KPIs should indicate good performance in areas like: 

  • Budget variance
  • Interest coverage
  • Average invoice processing cost
  • Operating cash flow ratio 

Balancing non-financial KPIs in accounting advisory services

It’s important to remember that business owners can face losses outside their control.  Market disruptions from external factors such as changes in interest rates and regulatory adjustments affecting wider industries are just two examples. As such, accountants need to factor these ‘anomalies’ into their KPI tracking systems and balance overall financial risks with long-term goals. 

For example, in the early part of 2020, worldwide shutdowns of the retail industry meant numerous companies had to invest in e-commerce technologies to keep up with consumer demand. 

As the world is likely to see continued economic disruption in the years ahead, companies must regularly review their financial KPIs and look for ways to adjust them to suit their current operating climate. 

For instance, measuring your client’s payroll headcount ratio can be a valuable financial KPI if there is an uptick in worldwide unemployment. The payroll headcount ratio is an efficiency metric, indicating how well employees might perform during international expansion projects.

Optimise foreign currency KPIs with WorldFirst’s fast and secure payment gateway

If you are looking to make your client’s accounts more resilient in the long term, make sure you recommend ways for them to speed up international payments. With a WorldFirst International Payments Account, your clients can make same-day or next-day invoice payments in over 60 global currencies. Check out our list of cut-off deadlines for international currency pairs for more information on making faster multi-currency payments. 

WorldFirst allows business owners to decrease operational costs by letting them lock in a favourable exchange rate for up to two years.

Xero accounting software can also integrate with WorldFirst International Collections Account, allowing you to track and manage all financial KPIs from one central dashboard. 

To find out more about WorldFirst account options, visit here or give us a call on 020 7801 2388 or email [email protected] and start saving now.