Why international expansion can turn into a real financial trap
The business idea has taken off, the product is booming, the customers are excited and even the sales are right. For many companies, these are the ideal preconditions for risking a move onto the international market. But watch out! Blinded by sheer entrepreneurial euphoria, those who forget that internationalization requires a considerable amount of preparation – particularly in the area of finances – can see their dream of global success rapidly turn into a business-damaging nightmare.
Businesses that leave the domestic marked need a well thought out strategy for dealing with foreign currencies, international tax rates and different billing requirements. What horror scenarios await companies that fail to adopt the correct strategic approach? And how can you successfully achieve cash management in hitherto unknown realms?
It’s time to get involved in the international market? With nexnet’s payment clearing solution, you won’t lose track of things, even in dealing with a variety of foreign currencies and tax rates. All of the information can be found here!
If internationalization is not taken seriously enough…
… a company can be quickly faced with financial ruin. But when a growing business is a cause for joy, many CEOs underestimate the enormous accounting effort behind growth and internationalization. Dollars, roubles, yen – are the differences really so significant? No doubt many will have already asked this question and dismissed it as irrelevant with a shrug of the shoulders in the worst-case scenario. In most cases, it doesn’t take long before the first inconsistencies in the books have been discovered and start causing panic. Companies that don’t pay attention to currency management and handling taxes risk not only incorrect entries in the monthly closing statement: the stocks and sales figures quickly become unreliable, the reporting is full of errors – and the company loses its way completely.
How start-ups avoid chaos in dealing with foreign currencies and taxes
Dealing correctly with foreign currencies is of decisive importance for the success of a company. The most important principles here are the use of exchange rates that are accurate to the day, the clear evaluation of stocks at the end of the month and the correct posting of currency differences. Failing to keep to these principles will mean incorrect invoicing and a balance sheet that leads to a rude awakening.
But having the right currency management alone achieves nothing. In e-commerce, for example, the question arises of whether physical or digital goods are being traded with – because this really makes a difference from a tax point of view. A digital good is available immediately, so the VAT has to be paid immediately. In the case of physical goods that take five or six days to be shipped, things look different: Yes, the VAT must be paid immediately, but to whom? Who is the tax recipient? And which country gets the taxes if, for example, the product is ordered in Great Britain, but is shipped from Germany? In cases like this, start-ups should seek help and support from experts in order not to lose track of things. And they need constantly document what situation leads to which tax.
You’re on the lookout for a reliable partner for financial management during your internationalization? All of the information you need on the outsourcing of your cash management with the Berlin company can be found here.
Why finance-outsourcing is worth it, particularly for start-ups
It’s a widely-recognized fact that the international financial cosmos is complex and difficult to understand for non-specialists. Start-ups often lack a uniform system or the manpower to deal with the new and more complex financial streams that come with internationalization. This leads to them intervening manually, which can often lead to errors. For them, outsourcing financial management in order to do justice to the complex requirements in dealing with foreign currencies, taxes and bills, is thus worth it. nexnet’s Payment Clearing processes all financial transactions in all currencies according to exchange rates that are accurate to the day – and turnover and VAT are automatically recorded using international tax rates. Through the outsourcing of their cash management, young companies will avoid many common sources of error in cross-border activities. In this way, they can concentrate on their core business again, while exchange rates, invoicing and tax matters are professionally monitored and managed by the external third party.
All finances at a glance with nexnet – even with internationalization
The Berlin-based company nexnet, one of the leading business process outsourcing service providers for credit management can, look back on more than 15 years of experience in national and international high-volume transactions, and supports DAX listed companies as well as young and growing companies. The individual nexnet-solutions are adapted to the increasing complexity of the business processes and thus help companies to get to grips with all of their financial streams. With its Payment Clearing, nexnet offers companies a simple solution that will allow them to monitor financial transactions efficiently, securely, and conveniently – and in a way that is international, cross-sector, and certified. Companies can thus concentrate on their core business, that is, generating reach and sales, while in the background nexnet secures the correct handling of the financial streams.
Article photo: Eyeem