29 January 2014 | Andrew Jesse
Connectivity, transportation networks and global product demand has steadily demolished the barriers to entering markets overseas. Businesses large and small have extended their networks to buy and sell across multiple markets and territories. But while opportunities to expand B2B commerce networks internationally are myriad, many businesses are ill prepared for supporting international growth.
According to research by The Hackett Group three quarters of firms use 'standalone spreadsheets' and 'manual data sourcing' to manage global financial and procurement data, and this is inhibiting their ability to effectively manage relationships and forecast. These archaic and opaque systems for managing financial information and supplier data are limiting the ability for organisations to do business abroad.
When managing financial processes, distance can have a significant impact on performance monitoring. When key performance indicators (KPIs) are only reported once a month or even once a quarter, a clear understanding of financial position can be difficult to obtain. More frequent - or ideally real time - financial tracking and data analysis can instil greater confidence and allow more accurate forecasting and risk analysis.
The Hackett research showed 'globalisation leaders' tended to have significantly better access to real-time customer, supplier and financial data. This transparency allowed them to more effectively forecast and have a better understanding of financial position.
A standardised process across the buyer and supplier network can simplify the tasks of gathering, storing and managing financial information and supplier data. When compared to isolated practices or siloed financial systems, international practices, processes and technologies provide a significant advantage to international businesses when applied to the commerce network. A robust, global, open, commerce network can increase market opportunities, improve buyer/supplier collaboration and better equip professionals for contract negotiation as well as improving procurement efficiencies.
However, internal financial systems and processes can be complex even in a domestic market. When exacerbated by language, currency and regulatory changes, financial processes can be pushed to their limits, allowing human error and lack of visibility to corrupt financial control. Vagaries in regulation, currency and taxes can sometimes disrupt comparisons between markets, making holistic reports difficult to interpret or unhelpful when comparing KPIs.
Automation is core to ensuring a single standard is maintained and variants do not creep in when dealing with multiple markets. It removes the capacity for human error and when combined with robust data management, integrity processes and technology will ensure errors and risk of fraudulent or erroneous payment is reduced.
When dealing with changes in currency, language as well as differing standards, taxes and regulatory requirements, attempting to manually accommodate all of these considerations is near impossible. Automation ensures even when reporting levels are increased, markets can still be compared, contrasted and holistic reports produced. Hackett Group’s research showed that those companies considered leaders in globalisation have mostly or fully automated key areas, up to 50 per cent more often than typical companies.
Effective financial systems should empower rather than fetter international trade. Well-managed and connected networks can help source additional opportunities and easily enable companies identify the low hanging fruit from potential market opportunities. With transparent, automated financial systems and real-time reporting the barriers to international trade should be simple to overcome and the rewards can speak for themselves.
☛ Andrew Jesse is VP at Basware UK