In a growing global marketplace, employers must ensure their finance staff have the necessary skills to work effectively across diverse legislations, business practices and cultures.
Overall, 2016 was a good year for British exports, despite the lack of certainty and loss of business confidence in the wake of the Brexit referendum. In total, UK businesses exported £291bn of goods and £240bn of services in the year to September 2016, according to the Office for National Statistics.
Export sales to the EU were 5.6% higher than a year earlier and are expected to continue to rise in 2017, albeit slowly. The Brexit induced decline in the value of the pound is likely to encourage even the smallest companies to embrace international trade this year. But are they equipped to deal with all the complexities arising along the way? In fact, does your company have the right people, knowledge and skills to successfully work with different currencies, laws and tax regulations? Not to mention the other challenge of overcoming language barriers and cultural differences?
Your finance staff must be able to deal with some of the real pain points that come with international trade. Ensuring that invoices are tax and VAT compliant in different countries and are meeting the relevant legal requirements can be a headache. It is also a moving target; governments are constantly changing the rules and each country tends to have its own criteria. Some of the rules are likely to change again post Brexit, therefore it is crucial that your staff keep abreast of developments.
But the biggest pain point of all seems to be late payments from overseas customers. According to a survey, 46.4% of the total value of British export credit sales are paid late. Here, adoption of best practices such as e-invoicing can speed up the collection process. Under the European Council directive 2010/45/EU, paper and electronic invoices are treated equally, which means customers in the EU Member States are legally required to accept e-invoices, rather than demand that a paper equivalent is sent in the post.
Chasing late payments can become complicated when the customer resides overseas. Finance staff may need appropriate training on the legal ins and outs of getting paid in the countries your company trades with, whether the laws cover enforceable debt collection and whether you can collect for extreme exchange rate fluctuations.
Because English is not the first language of many international customers, this can hamper the collection process. This is especially an issue if native speakers use unnecessarily complex or ambiguous phrases that may be too difficult for non-native speakers to understand. It’s therefore vital that all communications are kept clear and simple to avoid confusion.
A basic understanding of cultural diversity is also key to navigating the tricky waters of cross-cultural communication. Finance staff should be able to switch their communication style so it works in different cultural contexts. This is particularly important when delivering difficult messages, for example when chasing debtors. People from different cultures accept different degrees of directness. Germanic and Nordic cultures have no problem with very direct messages, but in an Asian context this could do more damage than good and could even be perceived as humiliating for the recipient.
Wade Macdonald’s ‘Accountancy and Finance Insights’ series aims to explore some of the real challenges and opportunities facing professionals in this space. Stay tuned for further insight.