By Craig Sullivan, VP & GM International, NetSuite
Late last year, the CBI predicted that exports could boost the UK economy by up to £20 billion by 2020 and last month, the Financial Times reported that non-EU exports recently exceeded those to the EU for the first time.
With the UK economy and the Eurozone crisis providing fewer opportunities for small businesses to export across Europe, many are now looking further afield — for example China, Brazil and India — for internal trade opportunities.
The growth opportunity abroad for small businesses is certainly clear, but there is one particular hurdle which they need to overcome if they are going to be successful and achieve that much needed growth; and that is complying with various international regulations.
The spiralling cost of compliance
Achieving compliance while also striving to delight customers and grow the business can be a headache — particularly when expanding into new countries. Each time a business enters a new region, it comes with its own currency, rules and tax regulations, meaning that the cost and time spent on compliance will significantly increase.
For example, take the average time required for preparation, filing and paying activities to do with VAT. In Switzerland it takes eight hours, but Bolivia requires 480 hours and Brazil is as high as 1,374 hours. To put this into perspective, the latter figure equates to employing one full time finance professional just to meet regulatory reporting requirements in just one country.
With budgets tighter than ever, finding a way of cutting through the red tape and delivering compliance, without spending a fortune on consultants — or even employing a full time CFO - is a key challenge for small businesses that are looking to trade or expand abroad.
A new approach to regulation
A different approach to the way finance operations are structured can reduce the time needed to achieve tax compliance, submit returns and maintain full auditability.
Technology is at the heart of this approach and while many small businesses may have relied on manual processes to manage compliance and other financial matters, they must move into the 21st Centruy and embrace new technologies if they are going to succeed in this highly competitive marketplace.
For example, a single financial platform, rather than a mess of disparate, manual systems, will enable organisations to produce accurate country or region-specific tax reports. And, ensuring that this platform sits in the cloud — that is, a technology which lets you run computer applications over the Internet, without having to buy, install or manage any servers — will ensure that any financial systems are automatically updated to reflect any changes in regulation. For example, if the VAT rate were to change again, the software could be updated instantly.
Take an organisation like Groupon, the daily deals company. When the company first launched in 2008, it only operated in a few small US cities, but today, it operates in 500 cities and 46 countries around the world. Each time it entered a new market, the amount of time and effort needed to close the books grew, turning financial reporting into a time consuming and labour intensive process. The collection of different programmes, processes and spreadsheets made it difficult to understand the full scope of its international operation, and made standardisation of practices impractical.
The company adopted a cloud-based system which allows it to support multi-currency management and local taxation compliance as well as reporting and analytics. Within three months, the system was live in 26 regions, with the rest following within a year. As a result, Groupon now has global visibility on all aspects of its business at any given time. By removing the headaches around compliance in each new region, the company has been able to expand at a phenomenal rate.
With many small businesses facing increasingly tough conditions in the UK, extra regulatory requirements for trading abroad are an unwelcome additional outlay — but the high cost of compliance no longer needs to be blindly accepted. By removing this cost, rapid international expansion and intentional trade can be enabled.
While many small businesses will not have the capacity, or even desire for a growth plan like Groupon’s, the company has shown that there are simple ways of getting rid of this unproductive burden, allowing the CEO — or whoever is responsible for financial matters within the business - to focus on growth and business success.
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