When establishing business operations overseas, it is important to work with people who are familiar with the regulations and commercial practices of that country and who can help ensure proper and timely compliance.
In the UK, responsibility for most of the non front-of-house tasks rests with the company’s financial controller or CFO. However, particularly where the overseas operation is just setting up or at an early stage of its development, it is not always easy or cost effective to employ someone just to fulfil this role alone.
One solution is to employ a general manager or senior salesperson who also has experience of financial and administrative matters. However, particularly, where the business is trying to obtain a foothold in a new territory, this may not be desirable, as it dilutes that person’s sales and other business development efforts.
As an alternative, it is common in the UK for overseas businesses to outsource the local financial controller and CFO function to suitably qualified professionals at accountancy firms (equivalent to CPAs) or other specialist service providers, at least until the overseas operation grows to the point where specialists can be employed in-house full time.
The areas where specialist service providers can assist, include:
• Financial matters, including bookkeeping, management accounting and financial reporting;
• Insurances, including helping to put in place insurances required by law;
• Advising on compliance with obligations under the Health & Safety at Work regulations;
• Arranging staff welfare and benefits such as health insurance, life assurance and pension plans for each employee and assisting with other human resources issues, such as payroll management and recruiting;
The benefits of outsourcing the local financial controller and CFO function include:
• Speed to market: outsourced service providers can provide a ready formed team of financial controllers, accountants and administrators who deliver a turnkey service;
• Cost savings: whilst the overseas office is developing, it does not necessarily require full time staff at each level of competence. Also, it avoids the need to pay fees to recruitment agents or employee taxes in respect of the services provided;
• Reduction in performance risk: the service provider should be suitably qualified and have a proven track record with the team who will look after the business. No matter how diligent a recruitment process is, there remains some risk that an employee’s individual performance is not as advertised or that they do not gel as a team. Additionally, whilst the UK office is new and small, it might be difficult to attract employee candidates of sufficient calibre;
• Chain of command, control and independence: often the financial controller or CFO of the parent organisation prefers that, in the early days, the administrative and accounting function reports directly to him/her and not to the local management. By engaging an independent service provider this can be more easily achieved;
• Reduction in financial risk; an independent service provider can be disengaged almost as quickly as it is engaged. The relationship with such a person is not subject to employment legislation and so the legal protections afforded to employees on dismissal will not apply.