As organisations venture into the global market, their finance functions become increasingly intricate. Dealing with multiple currencies, local accounting standards, and tax requirements can create obstacles in maintaining clarity and cost control. If finance processes are unable to address these issues, managing international expansion becomes exceedingly challenging.
Operating an international business with multiple, disconnected finance systems makes it nearly impossible to have a comprehensive view of the company and track key performance indicators (KPIs) across borders and entities in real time. Without real-time financial insights, companies are left making decisions based on guesswork and instinct, relying on monthly reports for guidance. However, by attaining real-time insights, businesses not only have the ability to identify and address problems early on, but also seize opportunities confidently based on their financial position.
In this blog, we delve into how CFOs and finance teams can utilise a cloud ERP system to function as a unified and more efficient entity across all the countries in which they operate, paving the way for sustainable international expansion.
Managing Consolidation
- Without an ERP system: Creating a consolidated operational and financial view can be a daunting task for businesses that operate divisions and subsidiaries in multiple countries using different financial systems. Dealing with multiple currencies often leads to manual importing and translation of information, which is not only prone to errors but also time-consuming and lacks the ability for drill-down analysis. Additionally, intercompany transactions may not be accurately posted in each system, resulting in challenges when preparing consolidated reports.
- With an ERP system: When both the parent company and subsidiary financial data are integrated into a single cloud-based system, consolidation becomes much simpler for finance departments. Such a system provides real-time visibility into the entire group's financial and operational data. An example of such an ERP system is NetSuite OneWorld, which allows companies to manage domestic and international subsidiaries, business units, and legal entities all within one solution. Businesses using this system have reported closing their books 20%-50% faster compared to disconnected or legacy systems.
Consolidation at the transaction level enables granular analysis, empowering smarter decision-making. Furthermore, when intercompany transactions are simultaneously posted in each company's books, they always align and can be automatically identified, facilitating easier group reporting.
Achieving Effective Localisation
- Without ERP: Localisation poses a significant challenge for finance teams in international businesses. They must navigate diverse accounting standards and legal requirements while considering cultural differences in invoicing and reconciliation practices. This often requires extensive manual effort, making analysis and audits more complex.
For instance, when a company's headquarters and subsidiaries are in different countries, reporting standards and charts of accounts often differ. Without a proper ERP system, finance teams are forced to export the group's results into a spreadsheet and prepare reports externally. Calculating local amounts for reporting purposes becomes a difficult task, as finding the necessary data can be a time-consuming process. Once the calculations are completed, teams must merge the group's results with the local reports. Initially, this may not be too challenging using a spreadsheet, but as the years go by and discrepancies accumulate between the group and local reports, providing detailed information to auditors becomes a complex exercise in tracing data. - With ERP: Overcoming the challenges of local statutory accounts becomes much easier with a cloud-based finance system that allows for seamless data access and automation. A single data repository eliminates the need for manual export and analysis, enabling teams to easily configure reports in either the group or local format. Data becomes readily available, allowing for in-depth analysis and exportation as needed. Any differences in results can be posted into the system and managed using local dashboards or reports. During an audit, conducting drill-down analysis at both the group and local levels is equally straightforward.
All international businesses must address cultural and last-mile localisation, as well as local statutory differences. With a cloud ERP, teams can efficiently manage these differences within a single system.
Gaining Valuable Insights
A cutting-edge cloud-based finance system, specifically designed to cater to multiple international entities, offers a remarkable advantage - it provides a real-time view of financials across all entities, no matter how widely dispersed they are. This empowers finance teams to swiftly adapt to changes in external factors like tax rules or economic conditions.
An excellent example of this is how inflation can impact a company. With a unified system and a live view of performance across all divisions, finance teams can analyse the effects of cost changes at any given time, seek necessary approvals, and take appropriate action. By incorporating planning and budgeting capabilities, the system enables the creation of "what-if" scenarios, allowing businesses to select the most optimal course of action.
Insights like these enhance control significantly. Subsidiaries are no longer isolated; instead, the central team can readily provide support whenever necessary. This streamlined approach also ensures continuity in the face of absences or staff changes, making it easier to maintain operational efficiency.
The Stairway Approach
In the world of technology, businesses have traditionally purchased on-premises accounting or ERP systems and gradually expanded them over time. However, these systems often have limitations and lack integration across different locations and business functions.
On the contrary, cloud-based finance systems offer a more streamlined and progressive "stairway" approach. As these systems are implemented throughout an organisation, they provide incremental value and benefits.
With the stairway progression, finance teams initially utilise their cloud ERP system to gain valuable insights, improve efficiency, and automate processes. As we've previously discussed, this leads to significant advantages. Subsequently, legal and compliance issues become more efficient due to automation and the availability of accurate data. Other departments within the organisation then begin to use dashboards from the finance system to enhance their day-to-day operations. Finally, when the entire business tracks key metrics and KPIs in real time and with greater detail, it gains a strategic advantage in making informed decisions.
This shift in how systems operate is a profound change, comparable to the transition from paper records to mainframe computing many decades ago. By moving away from disparate, on-premises systems and embracing a "true cloud" ERP, businesses can access global functionality while also localising it as needed. This empowers businesses with the capabilities necessary to fuel expansion, rather than being hindered by the challenges of their current expansion efforts.
NetSuite: Unlocking International Financial Success
NetSuite OneWorld is the ultimate solution for international businesses seeking to excel in the finance realm. With a comprehensive array of capabilities, including automated intercompany accounting and consolidation, multi-currency management, audit and compliance reporting, and tax calculation, NetSuite OneWorld offers two distinct advantages that set it apart from the competition.
- Firstly, consolidation becomes a breeze with NetSuite. By conducting all financial administration and consolidation within a single system and data model, businesses can simplify intercompany reconciliation and netting, ultimately accelerating the month-end close process. Gone are the days of dealing with disparate systems and manual work; NetSuite streamlines the entire process for enhanced efficiency.
- Secondly, NetSuite boasts exceptional localisation capabilities. Through a combination of its own features and those offered by its partner ecosystem, the platform is equipped to handle both statutory and "cultural" localisation. This means that businesses can quickly adapt to regulatory changes, such as a VAT or GST increase in a specific country, without the need for laborious manual work. In addition, NetSuite's extensive collection of partner integrations available in the SuiteApp marketplace allows businesses to seamlessly incorporate apps that cater to local requirements like e-invoicing.
It's clear that international growth is a key indicator of success for any business. However, for that success to be sustainable, organisations must be able to seamlessly operate as a unified entity while effectively managing the nuances of various regions. By making NetSuite OneWorld the foundation of your business, you can unlock invaluable insights and efficiency, ensuring long-term international growth.
In conclusion, implementing an ERP system like NetSuite with OneWorld can revolutionise the way international businesses manage their finances. With features such as consolidation, localisation, and valuable insights, this cloud-based solution offers significant advantages in terms of efficiency, accuracy, and decision-making. By centralising financial data and streamlining processes, businesses can overcome the challenges of multiple currencies, diverse accounting standards, and cultural differences.
To explore the ERP options available and discuss how they can benefit your organisation, get in touch with our team today.
