You could pick and choose the most affordable external administrative services in each country that you operate in, but it can often result in even greater inefficiency.
When looking to make a significant purchase, why do many of us look for the low-cost solution, and often choose – what appears on the surface – to be the easiest option?
In reality, the low-cost solution doesn’t always prove to be the easiest. Hidden issues can arise and result in extra effort and resources – which are easily overlooked when considering price alone. This poses the question: what is more important, price, or choosing the right solution?
A company operating across multiple jurisdictions could quite easily secure cost-efficient services by finding a local payroll supplier in, for example Germany, to process the salaries of its few local German employees. The company may source another cheap deal by going straight to a South African provider for local accounting support. Head to Thailand, Israel and Colombia repeating this process; whether it is for payroll services, accounting and tax compliance, or international entity management.
The company could seek out the cheapest version of the administrative services needed in each country… but there are significant downsides to this approach. Most notably, your company is shouldered with negotiating and managing different contracts and service levels for different services. Now multiply that by the number of countries you operate in; and remember the providers are using all kinds of different service models, cost parameters, and delivery methods.
There’s no service consistency. The administration and coordination burden is huge. Third party relationship control is overwhelming and vastly underestimated.
Today, companies are growing faster than ever, setting up entities and gaining employees from a global talent pool in places far from their HQ. Annual compliance costs are rising, management of global subsidiaries and special purpose vehicles is becoming more complicated, as is tracking the numerous tax filing deadlines. The leaders in these global businesses; CEOs, CFOs, HR Directors, General Counsel; are led to consider if the local supplier approach remains the right one.
Global consolidation of your smart-sourced services can bring so many benefits.
Global service providers offer economies of scale based upon the number or services you purchase, so the premium for the single global supplier can be minimised. Of course, the global provider will rarely want to compete with pricing of a local service provider for let’s say, a two-person accounting or payroll team operating out of their home office in Mexico City. But is what you’re saving in fees worth what you might be sacrificing in quality, efficiency and consistency across multiple countries?
It lowers your risk
It goes without saying that a strong, robust, reliable international provider cannot be compared with very cheap – but sometimes very risky – local options. If you’re a business with many different contractual agreements in place in multiple jurisdictions, what confidence do you have that all of these providers are actually keeping you legislatively compliant? Are they meeting the great variety of local reporting standards? Do they have ISO 27001 accreditation?
It is not unusual for businesses to have to establish specific internal departments purely to control their numerous in-country suppliers, checking they are being kept up-to-date with the local legislation and regulations. Negotiating and renewing multiple contracts every few years. These companies are consequently building overheads into a system that simply shouldn’t be necessary.
Now consider if the real cost of the cheaper, ‘easier’ option is actually more expensive than the global solution?
It helps you achieve greater business visibility
Do you need all of your global payroll costs in a single format and currency to aid your global analysis? Or the ability to share reports with management located around the world? Do you aspire to greater control and consistency in your global operations? Local provision makes this exceedingly difficult to achieve. Global consolidation of services with one supplier just makes sense and unlocks the potential for you to be able to answer such challenges.
Realise business potential
When you streamline your operations, you have the ability to put things in place that most probably didn’t exist before. Efficiency, consistency, compliance and a confidence in a solution that leaves you free to focus on reaching your business goals and setting even higher ones.