The challenges of global expansion within finance AP teams - Image by ar130405 from PixabayGlobal expansion, when operating internationally, means businesses inevitably encounter a more complex operating environment than in their domestic market. While it might seem premature, early – and repeated – consideration of the implications of being in foreign markets is necessary if a business is successfully to service demand for its products and services.

Even though it might take months or years for a problem to emerge, examining an organisation’s ability to operate outside its accustomed home territory can identify potential weaknesses and workarounds before such problems arise. For example, consider each of the following three issues concerning AP:

  • observance of local legal and regulatory requirements
  • compliance management
  • multi-entity and consolidation challenges
  • financial, and all staff, recruitment and management.

Observance of local legal and regulatory requirements

Legal and regulatory compliance in foreign territories is, often, unfamiliar. Issues like data privacy continue to complicate matters. Numerous foreign countries, including many in Europe and the Asia-Pacific region, have and continue to adopt what becomes a patchwork of often conflicting laws and regulations designed to protect (for example) parties as diverse as employees and consumers.

To dig deeper, every market requires attention to payroll compliance and is so doing to local taxation requirements. The same, if to a different degree, applies to purchasing, especially in regimes operating goods and services taxes (like VAT). Add to this privacy considerations, as demanded for observance of the General Data Protection Regulation (GDPR) in the EU, and the challenge becomes apparent – even for AP.

Consequently, ensuring observation of laws and regulations pertaining to privacy, employees, consumers and taxation/purchasing requires access to local expertise as well as a willingness to adopt new processes and technologies. To prepare, CFOs/FDs must set aside the time to understand the legal and regulatory environment of all foreign markets in which their business intends to operate.

Compliance management

Compliance management, at least in this context, is different from the observance of local legal and regulatory requirements. Why? Here, the significance relates to issues with potential criminality – such as money laundering and/or selling to banned parties or countries.

According to the Financial Action Task Force (FATF) “money laundering is the processing of these criminal proceeds to disguise their illegal origin. This process is of critical importance, as it enables the criminal to enjoy these profits without jeopardising their source.”

Activities producing ‘rewards’ include illegal arms sales, smuggling, drug trafficking, prostitution/slavery, embezzlement, insider trading, bribery and computer fraud. When criminal activities generate profits, the individual or group needs to find a way to enjoy the proceeds without attracting attention. Criminals attempt to do this by disguising the sources, changing the form or moving the funds to a place where they are less likely to attract attention – money laundering.

“In response to mounting concern over money laundering, the Financial Action Task Force on money laundering (FATF) was established by the G-7 Summit in Paris in 1989 to develop a co-ordinated international response. One of the first tasks of the FATF was to develop Recommendations, 40 in all, which set out the measures national governments should take to implement effective anti-money laundering programmes.”  Source: FATF)

Similarly, many countries operate lists which can ban sales of specific items and/or ban purchases from named countries. The USA operates perhaps the most fearsome of these under the jurisdiction of the Export Administration Regulations (EAR).

The point to bear in mind for AP professionals is that the anti-money laundering (AML) and export regulations demand rigorous compliance to avoid criminal accusations. As each country is different this requires direct management as well as access to up-to-date prohibition lists and the like. AP solutions which know about, and even manage, AML/export regulation compliance can mitigate businesses’ risk – and their CFOs/FDs much effort, and worry.

Multi-entity challenges

Multi-entity organisations with global supply chains and payables face complex issues. Dealing with disparate payables entities, for example, raises control and reconciliation challenges. At the same time, as risks rise so financial data accuracy can fall. This is a combination CFOs/FDs hate.

While some ERP systems support multiple entities to a limited degree, they do not solve the AP payment challenges. What is needed is a single AP payments solution which maps to each organisation’s entity structure across its ERP systems. Too often paying suppliers, partners, contractors and vendors across multiple entities and business relationships is one of the last disciplines to embrace ‘multi-entity’ with a single payment system.

Financial, and all staff, recruitment and management

Recruiting has become a pressing problem. This is an international challenge and has language and local custom implications. It means that before a business can operate in another country, it must find and hire the necessary ‘human talent’ to achieve its objectives. This applies as much to AP staff as to other parts of the business, and it applies even if the AP staff are located in other countries.

More broadly, workforce management requires processes supported by relevant technology. While some aspects of a businesses’ existing approach to HR may work overseas, others may not. Therefore, it is almost always essential to assess those processes (and systems) to determine whether they are relevant.

There is, however, an oft-disregarded asset – existing system suppliers. These may already operate overseas and their platforms will have the necessary capacity to function and conform with the regulatory demands of a specific location. CFOs/FDs should take advantage of such capabilities and knowledge to reduce risks and workloads, and this applies as much to those working in AP as to other parts of the business.

Paying globally

Having taken all the above into consideration, then there is the issue of paying globally (in the sense of across those countries where a business is operating). This means adopting a strategy for international payments, one which CFOs/FDs can:

  • understand the administrative and operations costs of taking on exchange conversion efforts
  • compare this exchange rates with the business’ bank(s)
  • establish and maintain foreign accounts along with the necessary compliance and governance
  • manage a treasury management function oriented to international operations
  • ensure compliance with AML regulations and banned sales lists.

To summarise

Managing AP internationally in accordance with the laws and regulations used in multiple locations is complex (which is why some businesses avoid ‘going abroad). What CFOs/FDs need is an approach with appropriate suppliers which can ensure that their business conforms. Expecting a finance team, especially an AP one, manually to adhere to so many laws and rules runs the tangible risk of non-conformance and even criminality. That has the potential to be expensive – in all senses. It is not a responsible use of a business’ scarce resources – whether people or funds.

Yet all is not ‘bad’. As mentioned earlier, an asset that CFOs/FDs can exploit is the knowledge embedded in international suppliers of software solutions, such as those oriented to AP, international payments and even HR. (q.v. URL for Tipalti white paper)

To learn more about what automation exists for the finance function and how it can benefit your organisation, Tipalti has sponsored an Enterprise Times white paper, which is downloadable here.

Tipalti from March 2022Tipalti comes from the Hebrew expression for “We handled it.” Tipalti is the only company handling both Accounts Payable and Global Partner Payments workflows for high-velocity companies across the entire financial operations cycle: onboarding and managing global suppliers, instituting procurement controls, streamlining invoice processing and approvals, executing payments around the world and reconciling payables data across a multi-subsidiary finance organisation.

Tipalti enables high-growth companies to scale quickly by making payables strategic with operational, compliance, and financial controls. Companies can efficiently and securely pay thousands of partners and vendors in 196 countries within minutes. Thousands of companies, such as Amazon Twitch, National Geographic, Business Insider, Hopin, Cazoo and Time Out use Tipalti to reduce operational workload by 80 percent and accelerate the financial close by 25 percent, while strengthening financial controls and spend visibility.

Previous articleRetail and eCommerce news from the week beginning 19 September 2022
Next articleDeltek completes Tip Technologies acquisition
Charles Brett
Charles Brett is a business/technology analyst consultant. His specialist areas include enterprise software, blockchain and enterprise mobility tech (including metering). Specific industry sectors of interest and experience include finance (especially systems supporting wholesale finance), telecommunications and energy. Charles has spoken at multiple industry conferences, has written for numerous publications (including the London Times and the Financial Times). He was the General Chair of the bi-annual High Performance Systems Workshop, 2005. In addition he is an author and novelist. His Technology books include: Making the Most of Mobility Vol I (eBook, 2012); Explaining iTunes, iPhones and iPads for Windows Users (eBook, 2011); 5 Axes of Business Application Integration (2004). His published novels, in the Corruption Series, include: The HolyPhone Confessional Crisis, Corruption’s Price: A Spanish Deceit and Virginity Despoiled. The fourth in The Corruption Series - Resurrection - has is now available. Charles has a B.A. and M.A in Modern History from the University of Oxford. He has lived or worked in Italy, Abu Dhabi, South Africa, California and New York, Spain, Israel, Estonia and Cyprus.


Please enter your comment!
Please enter your name here