Globalization will likely impact your business sooner rather than later. If you’re skeptical about that, here are a few fun facts: According to the World Trade Organization, the global export opportunity exceeds $7 trillion; Hay Group reported in Fortune magazine’s February 2015 issue that 72 percent of senior executives from the world’s most admired companies indicated that globalization will have a significant impact on their organizations; and according to the International Business Education Alliance, 11.7 million U.S. jobs were supported by exports in 2014, up 1.8 million since 2009.
Not the exclusive domain of big business
International trade has typically been dominated by large companies able to take advantage of their scale and reach, but thanks to digital technologies, that is no longer the case. Small and midsize enterprises (SMEs) account for the majority of companies and jobs in developed economies, and having SMEs participate in export is key to realizing this opportunity.
But SMEs face a number of obstacles going global:
- Difficulties accessing export distribution channels and in contacting overseas customers
- Costly product standards and certification procedures and a lack of information about specific requirements in the foreign country
- Unfamiliar and burdensome customs and bureaucratic procedures Poor access to finance and slow payment mechanisms
International billing and payment
Billing and payments might seem the least of concerns when going global, but in reality, getting paid by international customers can be a huge challenge. For most companies, domestic billing is easy. There are a ton of off-the-shelf software solutions, and the process is simple and straightforward: one currency, one format, and well-understood payment methods and costs. When it comes to international, the process is different. The process is far less transparent. And questions pertaining to different currencies, foreign exchange (fx) rates, fees, taxes and languages create issues in a number of areas. For example:
- Days sales outstanding: International payment processing can be very slow, negatively impacting cash flow, putting a strain on businesses, and impeding their growth. Reconciliation: Short payments resulting from hidden fx fees, manual errors and the lack of transparency increase operational costs and impact customer satisfaction.
- Cost: Companies processing either large sums or numbers of international receivables may be paying much more than they should for these transactions due to hidden fees and unpredictability around foreign exchange.
- Complexity: There are many region-specific challenges related to international payments from markets where you may not have a preferred banking relationship or agent in place. This can make it harder and costlier to do business there.
- Compliance: There are also important compliance and anti-money-laundering considerations that need to be taken into consideration in different regions.
Customized, fintech solutions
If your business is trying to expand internationally and you want to sell to 20 countries, you will be required to have local bank accounts and relationships in each country, not to mention the regulatory paperwork, and more. This is incredibly time consuming, and it distracts from the core business. And your current business-banking partner is probably not the solution. Fortunately, proven fintech solutions are available that can help you address these issues as you grow your international business. They enable companies of all sizes to offer their international customers a seamless, online payment experience at a fraction of the cost, while eliminating all the foreign exchange risk and reconciliation challenges typically associated with international payments. Payments can be easily customized by country, currency and institution. Businesses can manage international receivables with 24/7 tracking for themselves and their customers and ensure that robust compliance and anti-money laundering controls are applied to every transaction.