The global economical slow down is creating a situation where companies can see their net margin being reduced and are then pushed to prospects outside of their historical geographical market area, in order to maintain the company revenue and margins.
Finding new prospects, creating and operating a new entity in arising markets, can be a challenge due to the specificities of the country. For example the local practices in term of doing business might be different, the language which could be an issue and the obligation of using local content and deal with changing regarding importation & tax regulations.
However in order to remain attractive and competitive, a company should always focus on the development of more innovative products & services, corresponding to the optimisation of its Core Business strategy.
Moreover an effective Marketing Strategy including an eCommerce strategy and its global logistic related activities.
New elements such has Data security and Data management are now part of this new competitive companies strategy.
The question is then what are the possible solutions here and what functions can be outsourced in this scenario ?
The company fixed cost reductions remain a priority in the current economical scenario, meaning:
- Reducing the headcount and improving the internal processes and productivity when possible.
- Reducing or postpone all expenditures (OPEX & CAPEX) in order to manage the revenues vs. liabilities and meet the requirement of a new budgeted scenario.
- Investing in the definition of more innovative products and services, which will certainly increase the company revenue (as usually innovative products goes with higher cost and reduced TCO for the clients).
- Adjusting the R&D and training spend, according to the new market opportunities.
- Renegotiation of any Liabilities like loans, bonds, etc.
What would be the reasons then for the externalisation of the accounting to a third party?
- First able the company can then focus more on their core business in order to be more competitive.
- Cutting down fixed costs by using an external third party, which will be paid pro rata to the work provided, rather than covering a fixed cost by having a dedicated number of employees.
- Increasing the function awareness as a specialised third party will probably have a better knowledge of the local regulations applicable.
- Reducing fraud.
Make or buy calculation can be done here :
(variable cost of USD12 x number of transactions vs salary of x accountants.)
What would be then the reasons for the externalisation of the Tax Management to a third party?
- Cutting down fixed costs by using an external third party that will be paid pro rata to the work provided, rather than covering a fixed cost by having a dedicated number of employees.
- Raise the expertise level in global and fast moving environment, managing tax rules and responsibilities in collaboration with experts specialised in Tax Compliance, Risks Management and Financial Reporting.
- Reducing the risk to misunderstanding the regulations in new markets & remote areas.
What would be the reasons then for the externalisation of the Sourcing and Supply Chain Management?
- Having access to experts having a deep knowledge of specific suppliers markets and to quickly obtain key information about the opportunities available.
- Increase the function awareness, as a specialised third party may know its market best practices and the opportunities available for a country or for a suppliers market targeted by the company.
- Resolve the problems linked to various languages spoken and local practices.
- Manage the logistic activity with a reliable partner, that will access the risks linked to the country and issues linked to the importation of goods (Trade compliance rules, country situation, Importation & Tax rules).
- Leverage the suppliers innovation and adjust the company expenses for R&D.
- reduce the company admin expenses by reducing the number of transactions
There is no ideal Scenario here but certainly an effective and sustainable solution can be obtained depending of the company size, market and strategy.