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Spend Management
February 7, 2022

How spend management addresses accounting challenges for companies with international subsidiaries.

Written by
Laura Slauson
Laura Slauson
How spend management addresses accounting challenges for companies with international subsidiaries.How spend management addresses accounting challenges for companies with international subsidiaries.

Once the domain of large-enterprise corporations, today even small companies are setting up international operations. While there are many strategic advantages to establishing an international subsidiary, it can be a heavy lift for an already overburdened finance team. Not only do they have to set up new finance functions but they also must adjust to the operational challenges of cross-border transactions and remote employees. A consolidated spend management platform can help. It can handle all non-payroll spend from end to end, from any legal entity in a company, while providing a consistent, automated experience for finance and employees alike.

Why leverage subsidiaries?

For many businesses, the process of establishing a subsidiary focuses on a risk mitigation framework, in which a company’s risk tolerance determines the course of action. Some reasons subsidiaries are established include:

  • Creating a legal entity for an acquisition.
  • Broadening strategically into new markets.
  • Protecting IP and limiting liability.
  • Managing permanent establishment for tax purposes.
  • Taking advantage of tax incentives, or helping reduce tax liability of the parent company.
  • Expanding to other regions to attract and retain top employees.
  • Improving operations with an expanded presence.

Remote employee considerations.

The challenges of managing decentralized spending accelerated with the shift to remote work in the spring of 2020, and all signs show that the trend will continue. One FlexJobs survey found that 58% of workers want a fully remote job. In response, employers have broadened their talent-searching beyond their own locale, and even their own country.

In a competitive job market, companies need to offer the best employee experience possible, and factor in different locations in terms of payroll and benefits. When dealing with a distributed workforce, a subsidiary offers solutions for:

  • Cost effectiveness. Some companies use a professional employer organization (PEO) to manage remote employees, but often run into a tipping point at which it’s more cost-effective to have a subsidiary.
  • Easier access to the tools for global hiring. You want the best talent possible, and a key element of this is being able to successfully recruit across the globe.
  • A better corporate culture. A subsidiary can make it easier to retain resources by offering a localized corporate culture.

Despite the many incentives, a distributed workforce creates extra challenges for the finance team, who are likely already juggling multiple systems, processes, and payment types. Without a scalable foundation in place, setting up a subsidiary adds even more accounting and operational points to address. The finance team must consider:

  • The ERP. The GL must be set up for both primary and statutory books.
  • Functional currency. A decision must be made regarding the functional currency, and transactions in other currencies must be recorded using the current spot conversion rate for the functional currency rate.
  • Tax requirements. Companies have to research the tax requirements in all jurisdictions.
  • Paying local vendors. Not being able to pay a bill in the local currency slows down payments and adds to the administrative burden for finance.
  • Reimbursing employees in their local currency. Employees expect to be reimbursed quickly, so the need to convert to other currencies shouldn’t slow things down.
  • Reporting needs. When transactions take place in multiple regions and employees are scattered across the globe, it can be difficult to get the updated financials necessary for quick decisions, particularly if it’s taking weeks to close the books.

If these issues aren’t approached thoughtfully, the accounting challenges faced by accounts payable will only magnify as the company expands.

Systems that accommodate subsidiaries.

A spend management system automates the flows associated with non-payroll spend to pave the way for easier support of subsidiaries and to de-risk spending by remote teams.

Request and approval compliance. Employees need to have consistent approval workflows, no matter where they are, and the workflows should be automatic to remove any ambiguity about who approves what.

Making payments in multiple currencies. It should be possible to pay vendors no matter where they are, what currency they use, and what type of payments they accept.

Booking transactions to the subsidiary level. A system with subsidiary support can book transactions at both the parent and child level.

Consolidated view from subsidiary to parent. Advanced reporting functionality makes it possible to consolidate financials from multiple levels.

When these elements are in place, a spend management platform can help orchestrate all non-payroll spend — bill payments, corporate card spend, and employee expense reimbursements — in multiple locations, without adding complexity to the finance team’s workload.

Employees also appreciate a consolidated platform. A platform that works in multiple currencies and payment types provides a consistent experience no matter where an employee is and how a vendor wants to be paid.

Evaluating spend management platforms for complex organizations.

Having the right systems in place can help the finance function scale efficiently as a company takes on the risk and rewards of subsidiaries. However, it’s important to build a foundational structure that offers flexibility. When evaluating spend management platforms, the following questions can help determine if they will simplify accounting operations, even as the organization grows more complex:

  • Can approval workflows be configured to reflect each subsidiary’s policies?
  • Can employees be onboarded through an HRIS system, no matter where they are located, with the correct approval workflows automatically populated to their profile?
  • Can transactions be automatically booked at the subsidiary level?
  • Can the platform manage all non-payroll spend, from end to end?

Despite the challenges a subsidiary can introduce to a company’s finance department, a consolidated spend management platform provides real-time visibility and control at both the subsidiary and parent level, for all non-payroll spend, for the entire spend lifecycle.

Let us show you how Airbase’s consolidated spend management platform addresses the challenges of subsidiary management.

Laura Slauson
Laura Slauson
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About Airbase

Airbase offers a one platform solution to manage all non-payroll spend. It provides oversight and control over spending with real-time reporting and automatic syncing directly to your general ledger. Control all paymentsphysical cards, virtual cards, ACH, and checks – from one place. Close faster. Empower employees. Control spend.

To learn more about Airbase, contact us for a product demo.
Laura Slauson
Laura Slauson
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