Despite the global economic impacts of coronavirus, hampered international trading conditions following Brexit and the uncertainty created by Russia’s invasion of Ukraine, many British companies remain interested in growing and diversifying by establishing overseas operations.
Expanding into new territories is a huge decision and SMEs, in particular, must consider five crucial cost management implications.
The costs of compliance
Every country has its own business laws and regulations, which may change. Complying rarely comes cheap and there may be the nasty surprise of ruinously expensive penalties if you unknowingly breach any rules. These might dictate how you manage your data, premises, labour, marketing, labelling, tax and H&S, among many other obligations for commercial operations.
You must ensure that you know all policies, have systems to fulfil responsibilities and know how much compliance with each will cost. Consider particularly whether you must have a physical base in your new market and if you need to employ locals, as both are red tape heavy.
The process requires lengthy planning, taking the time to understand what you’re spending your money on in new territories and why. Breaking everything down into individual parts, gives more visibility on spend when setting up abroad, whilst also guiding on future spending patterns in this new location.
Enlist a reliable international payments partner
To help navigate the complex waters, secure the right advice before committing to trading abroad - such as the support of an experienced Global Professional Employer Organisation (GPEO). And appoint on trusted recommendation only.
Making your money work harder
Getting the budget right will be key to success. Research all costs keenly and accurately and ensure that you are financed to cover every area of anticipated expense. As in any other business activity, you must get your bottom line right for international growth.
While there are many different outlays to take into account when moving overseas, always keep your eye on potentially volatile factors like exchange, interest and inflation rates.
Ensure that you understand how each of these vital mechanisms work in your new operating areas for realistic, healthy financial control. Never assume that everything remains the same from country to country – indeed there can be sharp difference between municipalities or states within nations. There is no getting round the fact that you will need to set aside time for serious, in-depth financial planning.
A top tip for keeping abreast of market conditions is to keep tabs on currency markets and prices with quick online updates. These are a vital barometer of confidence or the lack of it and an absolute must for businesses working across many countries because exchange rate volatility can cause huge financial losses very quickly.
It is vital that international operators enlist a dependable international payments partner who can secure the best available rate on any given day, lock in favourable ones over longer periods, minimise fees and help navigate any regulatory needs. Again, it is important to have referrals before commissioning services.
Managing an overseas workforce and suppliers
Investing in tech is not an option in business, it’s a must – and, particularly when building an overseas team, you must have the right tools to empower your employees to confidently, yet responsibly, spend money.
If you haven’t already built an efficient financial tech stack, journeying to new geographies is the time to do so. Modern expense management systems are a great first step, as they give SMEs complete visibility over their spending and cut admin time. Businesses should also try to negotiate shorter payment terms and break clauses in their contracts with suppliers, as the lingering economic impact of the pandemic is predicted to continue throughout 2022.
If you’re moving staff abroad – whether permanently or for the new operation’s initial launch – another crucial issue is monitoring overseas spending. Credit card expenses can add up. Quite apart from interest, there are a lot of hidden charges when they are used abroad. Among these are fees on transactions, point of sales and ATM withdrawals.
By using prepaid cards instead, financial decision makers retain control over permissions, budgets and visibility on all teams’ spending – no matter where they are in the world – via simple receipt upload and annotated transaction features.
Proceed cautiously
In conclusion, remember that expanding overseas is not the only route to growth and not for everyone. Efficient research will establish whether your business is ready or when it might be. Apart from regulatory and economic factors, local market conditions and cultural landscapes must be understood and navigated.
Take your time, speak to companies that have made the move successfully, enlist expert partners and support agencies. If you don’t, you may find that poor preparation and knowledge bring massive, wasted expense and operational challenges that could have been avoided.
