The accounting market has grown faster than the global business and economic sectors for years. Its value is expected to reach about $677 billion in 2025, and in the next three years, we expect it to hit more than $800 billion.
With this growth come many challenges, which demand foresight and adaptability in today’s changing global economy. Understanding those challenges is important for global accounting service providers to maintain relevance and provide invaluable insights in an interconnected world.
International Accounting Challenges
According to experts at BoardRoom, building a global presence is the key goal. However, this is not something that happens in just one night. Your business can be a real force in its original market, but you can’t automatically transfer that success into a foreign market.
When businesses expand globally, they face a lot of challenges. The following are some of the challenges that are associated with international accounting:
- Language barriers: Among the greatest challenges you can face when growing internationally is to decide how you will communicate with staff, clients, and other stakeholders. Generally, people prefer buying from businesses that speak the language they understand. So, English-only marketing strategies can limit growth. Workers, too, are more comfortable using their native language and can be more productive. However, this goes beyond communications. It applies, too, to technology and tools that people use to do their work. Therefore, accounting systems must support various languages in addition to ensuring that internal documents are correctly translated.
- Short closing Deadlines: Regardless of these complexities, groups need to publish consolidated financial states within a short period to provide investors and meet legal responsibilities. This tight deadline requires intense rhythms and proper coordination between various entities. Every subsidiary needs to prepare its financial statements, which are consolidated at the group level. This consolidation needs adjustments to harmonize accounting practices and eliminate internal transactions.
- Lack of KPIs and standardization processes: Lack of KPIs and inconsistent processes may result in inefficiencies in accounting services. Establishing KPIs and standardization processes for monitoring performance allows us to work objectively towards the same goals. Ensure you regularly update and review standards to maintain effectiveness and efficiency.
- Exchange rate volatility: We expect businesses to use national currencies and enter new markets. But this isn’t convenient for a local business partner. In many countries, it is very legal. Dealing with many currencies increases the complexity of economic processes, risks, and uncertainties. Exchange rates continuously change throughout the day. That means the value of global sales changes compared to the company’s base currency. It is important to note the impact of these income differences.
- Tax codes: Tax codes that significantly vary from country to country are very challenging to understand, even for your financial staff with enough years of experience. The challenge is amplified when looking to understand which codes apply to your business depending on where it operates.
- Unclear expectations and goals: Cultural and language barriers may further complicate accounting tasks with ambiguous expectations, instructions, and goals. Miscommunications on either end may result in delayed workflow or financial reporting errors. Establish detailed and clear challenges and document all your specific expectations, goals, and deliverables. Regularly visit those documents to ensure everyone is always on the same page.
Overcoming these Challenges
Two important things you have to concentrate on are manpower and time. Everything should fall in place when these two factors are nailed down. But apart from having these two factors nailed down, you will also need to implement the following strategies to overcome challenges associated with a global accounting service:
1. Establish a Clear Communication Protocol
Establish clear communication strategies at the start of outsourcing engagements to help close communication gaps. Regular online meetings can help guarantee successful and efficient communication.
2. Keep Pace with Ever-Changing Compliance Requirements
All jurisdictions have their regulatory frameworks, often continuously evolving and complex. For an international business, this simply means navigating moving targets of compliance duties, from financial reporting requirements to tax regulations.
A practical step is using real-time compliance tracking systems to stay updated on every regulatory change. A regular update from a local expert can help your business adapt to and expect changes before they even pose compliance risks.
3. Manage Cashflow
Most businesses fail because of poor cash flow management. Regardless of its importance, most businesses struggle with cash flow. This often results in potential insolvency and liquidity issues.
The solution is to invest in automated tools. That is because they are not just the best way to manage your cash flow. They are also a perfect way to monitor your business’s financial performance. By leveraging automated tools for managing cash flow, you can streamline treasury operations. This, in turn, enables financial experts to concentrate on risk management and liquidity.
4. Find the Right Team
With the increased demand for specialized accounting services, companies struggle to recruit a qualified team. Outsourcing provides an invaluable solution. It achieves this giving access to a wide pool of talented experts. This is without the hassles of training and recruitment. Partnering with outsourcing service providers doesn’t just enable companies to tap into an international talent pool. It also enables them to scale operations depending on changing workloads.
5. Use Strategic Practices for Accounts Receivable Management
Delayed accounts receivable can pose accounting issues for business organizations. This, in turn, impacts operational efficiency and cash flow.
To handle these accounting issues, business organizations must use strategic practices for managing receivable accounts. This doesn’t just involve developing clear payment terms and conditions. It also encompasses communicating with them early to set expectations with clients.
In addition, immediate follow-ups on overdue incentives and payments for early settlement may improve cash flow. By adopting the right approach to managing receivable accounts, your business can improve operational effectiveness and financial stability.
In conclusion, successfully navigating international accounting challenges doesn’t just require an adaptive approach. By fostering a motivated/skilled workforce, embracing technologies, and complying with rules and regulations, accounting experts won’t just overcome challenges. They also contribute to the financial integrity and success of their business organizations.
