The global economy is on pace for its fastest growth in 40 years, according to a recent IMF forecast.
For growing B2B companies, international expansion presents enormous opportunities. It opens the door to new customers, expands support for existing customers, increases access to talent and diversity, and it provides exciting new experiences for employees, to name just a few.
Assuming it all goes well, of course.
International expansion can introduce pitfalls to growth strategies if a few things aren’t taken into consideration early on. Before you think about entering new global markets, here’s what to know:
1. Understand the market
There are a lot of factors to consider in setting up overseas — including market size/potential, product fit, competition, access to talent, and whether you already have an existing customer presence there. Language could impact product localization requirements as well as distribution, infrastructure, and resource investments. At the next level are issues such as sovereignty (e.g., Brexit), compliance regulations such as GDPR, and banking and payment infrastructure.
That last point — banking and payment infrastructure — is often overlooked. The challenges of getting paid by international customers are often grossly underestimated – leading to a lot of problems that may impact cash flow, operational efficiency, and customer satisfaction.
In fact, in our recent study of more than 300 CFOs at mid-market organizations who are looking to expand internationally, finance leaders said that the difficulty with collecting cross-border payments slowed global expansion at their businesses. More specifically, 88% cited difficulties scaling into new regions due to cross-border payments, and 92% said global expansion efforts could accelerate if their businesses could deal with foreign exchange rates in an easier way.
Solving cross-border payments has little to do with a customers’ willingness to pay. It’s typically more about the complexities, time and costs involved in billing your customers, enabling them to make the cross-border payment to you, and your business receiving it.
2. Prioritize your payment obstacles
To ease payment challenges, businesses will need to consider:
- Billing – Are you billing in your local currency or the customer’s? Are you requesting payment in your local currency, or giving the customer the option to pay in theirs? How does this get recorded in your financial systems?
- FX —How do you reconcile the billed amount with the amount received after foreign exchange? This can lead to short payments and a lot of manual effort.
- Currency Controls – Many forms of payment are subject to currency controls imposed by the originating country. This may limit transaction size or require layers of bureaucratic paperwork and specific approvals before transmission.
- AML, Fraud and Other Regulatory Requirements — Different countries have different regulations designed to protect businesses and their international customers from data breaches, fraud, and money laundering schemes. These may require specific encryption standards and certifications.
- Local Banking Relationships — Moving money out of different countries may requirerelationships with local banks and regulators.
- Customer Support — Billing and payments are one of the largest drivers of inbound customer service inquiries for many businesses. It’s important to have knowledgeable local language speakers available to address them during customers’ operating hours.
3. Automate your AR processes
These issues don’t have to slow or block international expansion. An AR solution that does everything from tailored invoicing to settlement and reconciliation, to customized integrations with ERP solutions like NetSuite, could eliminate many of the operational challenges related to international payments. Having the ability to see all AR data in one place also allows you to benchmark certain regions against each other and accurately forecast and plan resources.
For CFOs, entering new markets does not have to be done alone. Embracing a smart, data-based approach to international expansion can help you scale your business and accelerate growth.