Weathering the Storm: How Cross-Border Strategies can Help Overcome the Unexpected
How Cross-Border Strategies Can Help Overcome the Unexpected
Victor Hinojosa | Vice President | AscendantFX Capital Inc.
I have frequently warned my franchise industry clients of unexpected risks, otherwise known as “black swan” events.
They have historically been trade tariffs and global supply chain disruptions, not global pandemics which grind life and commerce to a halt.
At the dawn of a new decade, nobody anticipated that our day-to-day reality would be so quickly upended. The COVID19 pandemic has exposed the vulnerability of our local and international supply chains. To weather this storm, international franchises will have to look at the bigger picture of their efficiencies, deficiencies, and opportunities as a business.
I have decades of experience working in finance and foreign exchange, and currently work with franchise businesses at AscendantFX Capital. At times like this, squeezing every bit of capital and efficiency out of your business could mean the difference between survival and demise. This is especially true in the QSR industry, given that it is literally a “penny business”.
Let’s look at some of the areas where cross-border payments can cost you and your franchisees money, and potential strategies for improving these processes to save in unexpected ways.
Paper vs. Digital
Many businesses still rely on issuing and receiving checks for things like equipment purchases, royalties, and franchise fees. Even without a global pandemic overloading mail services, continuing to work with checks alone for cross-border payments is extremely inefficient and costly.
In this current environment, many companies are facing the challenge of managing checks remotely. Companies are having to move to remote check printers or have specific workers go to their offices to physically send check payments. I know of a major a global logistics and supply chain company that is trying to navigate this process right now, and it is extremely difficult to do. They’ve reduced their accounts payable staff by half during the pandemic while simultaneously moving them to work remotely. Needless to say, there have been implementation pains and client friction due delayed and lost payments.
This crisis is making organizations aware of the need to move away from paper checks. FinTech companies can provide you with the opportunity to digitize your entire accounts payable payments process, which is helpful even in normal times. Payments have more transparency, and can be executed and tracked in real time. Digital payments are also easier to build reports upon, with data points on who is entering, approving, and executing them.
This increased efficiency will lead to better service and transparency for clients and franchisees.
Global Supply Chain & Foreign Royalty Collection The wild currency movements due to the pandemic have been as dramatic as five percent to 10 percent in as little as 24 hours, and this currency volatility has not abated. If you’re an importer/ exporter, this will have a significant impact on your supplies and costs. If you are a franchise organization that has a risk management program in place already, you may be able to weather these fluctuations while simultaneously taking advantage of favourable price movements for the foreseeable future. Ensuring that you have a risk management program in place is