Embracing change: The role of accountants in an evolving global landscapeby
The emergence of online technology has made it easier for businesses to reach international customers. However, going global doesn’t happen overnight and establishing the right financial infrastructure is crucial to ensure any expansion is sustainable for the long term.
In this two-part series, developed in association with WorldFirst, Carol Baker looks at how accountants can become a centre of excellence to support their client’s growth ambitions.
The number of global consumers globally continues to grow and is forecast to reach nearly £5bn by 2030. E-commerce and international marketplaces are absorbing a growing share of this new spending power, as digitalisation makes it easier and cheaper to achieve an international presence than ever before.
Marketplaces like Amazon have made it almost frictionless to sell products internationally at the click of a button. It is now as easy to sell a product in Australia as it is in the UK.
The shift towards online channels accelerated during the pandemic, with retail e-commerce sales worldwide reaching $4.28tn and e-retail revenues projected to grow to $5.4tn in 2022. So, it comes as no surprise that many UK businesses are looking to use these channels as a springboard for international growth.
With cross-border e-commerce driving business expansion and growth, UK businesses need sophisticated and robust financial infrastructure to collect and repatriate funds, manage multiple currencies, make international payments, manage risk and reconcile payments.
A fast-changing landscape
The financial landscape is moving fast and requires regular evaluation. For example, last year Amazon launched the Payment Service Provider (PSP) Program as part of its continuing effort to make its marketplace the safest and most trusted store in the world for customers and sellers. This means sellers can only use a payment service provider that is participating in Amazon’s PSP Program, such as WorldFirst.
As a result, many sellers were required to change how they receive and manage international funds. This financial complexity can be daunting for an e-commerce business focused on growth. Accountants and bookkeepers have an opportunity to provide additional support for their clients and indeed grow their own business offering and value.
International growth is both a challenge and an opportunity
Currency fluctuations and hidden fees affect business profit. Accountants are increasingly being called upon to advise on international collections and payment options. In the past, accountants merely advised their clients to talk to their banks, but with the plethora of new payment services providers (PSPs) continuing to emerge, the international payments landscape is increasingly competitive. For accountancy firms and their clients, there are now multiple avenues to save time, reduce costs, manage risk and even speed up supply chains.
Any company trading internationally faces currency risks. When a UK company receives an invoice for goods from a foreign supplier, it needs to conduct a foreign exchange (FX) transfer from sterling to match the amount due in the supplier’s currency.
If sterling weakens between the time of order and payment, the company’s budgeted funds may not be enough to meet the supplier’s invoice value. More funds will be needed to make up the amount – thus reducing expected profit and upsetting the pricing structure.
Furthermore, if the company was relying on a traditional provider of banking services, it may have been additionally hit by uncompetitive exchange rates, delays in settlement or higher service charges.
Offering the right advice to your clients
To maintain their position as the go-to adviser for clients, accountants recommending a payment partner have to stay abreast of the best options and shield the client from any hidden costs. They also need to consider how the client is able to manage currency risks whilst moving their funds as quickly and securely as possible.
Finally, they need to make sure that their clients are able to maintain a transparent and clear view of their income and expenses across borders.
This means that the business should always know what rate they will receive on every trade ahead of time and have solid risk management strategies (such as forwards contracts and hedging) to manage currency risk fluctuations and ensure that profits are not eroded by unexpected expenses from transferring one currency to another.
The accountant's role
International expansion can be challenging, so accountants have a key role to play in supporting these efforts. Ensure you work with the right partner who can not only provide a solution to overcome today’s challenges, but also provide a platform to grow in line with your client’s business strategy and ambition.
It’s also important to be sure that the payment partner can integrate with the business’s existing accounting software and processes. Eliminating the need to re-key data from one system to another reduces accounting admin time and error. It also provides fast and accurate records of international transactions for tax, budgeting and forecasting purposes.
What to look for with payment partners
Unlike traditional banks, the next generation of payment solution providers, such as WorldFirst, take a partnership rather than a transactional approach with accountants – working collaboratively to provide education and support for accountants and their clients, not just international financial infrastructure.
The right payment partner should help you and your clients streamline international payments and collections. They make it possible to open multiple currency accounts - meaning that clients can pay overseas suppliers and staff as easily as if they were based in the same country. This can speed up supply chains with fast supplier payments in their own local currency.
Businesses can also collect revenue from clients, suppliers or online marketplaces and payment gateways in multiple currencies. This FX flexibility means they can collect in one currency such as euros, and pay their suppliers in US dollars without the need to convert via sterling.
By recommending and working alongside the right payment partner, accountancy firms can support their clients’ international ambitions, and in turn provide additional services to help the practice grow. How to do this will be the subject of our next article.
This article was brought to you in association with WorldFirst. WorldFirst has a dedicated international trade team who are always on hand to work with accountants and show how they can help their clients make cost and time savings.