Challenges of doing business overseas can be overcome

Ambitious north-east firms are looking at opportunities and benefits available to them by doing business internationally.

Reasons for an internationalisation strategy may be to capitalise on growth opportunities, to take advantage of lower cost bases or tax rates or to gain economies of scale.

Pursuing such a strategy is challenging; there are likely to be barriers in relation to internal resources, cultural differences, information flow and legal procedures. While this can make some nervous about venturing overseas, with the appropriate preparationandsupport there is no reason why businesses should not be successful.

Here are some of the challenges that businesses will have to address:

Strategy: an internationalisation strategy needs to be carefully researched, plannedanddocumented. A dedicated team is then requiredtomakesuretheplan is properly implemented.

Taxation: careful planning is required to ascertain the most tax-efficient structure for the operation. Other key areas for consid-

eration are the pricing of goods and services supplied to overseas group companies, repatriation of profits and complying with reporting requirements.

Payroll: anentityemploying individuals overseas will require assistance with local payroll taxes and reporting obligations. This can become complex when individuals are moving between several jurisdictions.

Funding: any growth plan is likely to result in an increased working-capital requirement. Budgets allocated for overseas expansion are frequently underestimated and planning is required to quantify the cost of investment.

Systems: the adequacy of financial systems for dealing with transactions in foreign currencies, branch reporting and consolidation

of overseas subsidiary accounts must be considered.

Financial reporting: an overseas subsidiary or branch may have to file accounts in the relevant country. These accounts may also require to be audited.

James Pirrie is a partner at chartered accountant Anderson Anderson and Brown

James Pirrie: planning