BTN Blueprint: How To Manage Cross-Border Payment And Expense Processes - Business Travel News

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BTN Blueprint: How To Manage Cross-Border Payment And Expense Processes

July 02, 2012 - 03:40 PM ET

By Suzanne Hayes Rose, communications specialist, IBM Global Expense Reporting Solutions (GERS)

Globally expanding your business in today's economic environment is daunting yet more imperative than ever. As businesses of every size seek to become part of the global conversation, they often adopt new, integrated business models and seek broad transformation at the finance level. At the same time, they are targeting today's growth markets, which typically are outside of North America. Capturing these new opportunities requires more than just setting up shop in a new geographical region—you also need to understand the culture, the language and the traditions in order to more effectively conduct business transactions. This means your organization needs to be able to deftly handle such practical considerations as currency exchange and be well-versed in the targeted region's varying and evolving legal and fiscal requirements. When it comes to travel and expense management, you'll see wide variances from country to country in value-added tax reclaim rules, preferred payment and expense systems, and per diem travel allowances. 

Suzanne Hayes RoseEfficiently Managing The VAT Process 

As you seek to expand, you'll find that international taxes, including the value-added tax (VAT) and goods and services taxes (GST), can be complicated. In the same way that sales tax in the United States varies among states, every country's requirements are different. These taxes can amount to significant sums of money, and penalties if you don't comply.

Understanding the subtle nuances of these differences is essential for effectively managing programs and communicating with senior management and travelers on a multinational, pan-European or global basis. Did you know, for example, that VATs range from 15 percent to 25 percent depending on the specific country? And did you know that companies doing business internationally can recover virtually 100 percent on eligible expenses from up to 41 countries? These expenses cover hotels, restaurants and meals, car rental and local transportation, business entertaining, telecommunications, training, trade shows and conferences and more. In addition, reclaimed VATs can quickly add up to even more savings. By the same token, the consequences and costs of errors and noncompliance are often severe and can stand in the way of your corporate growth.

Globalization Matters 

Each country with a VAT refund system has different (and ever-changing) rules, regulations and deadlines, so the reclaim process is a complex and time-consuming process. And the more countries you do business in, the more overwhelming it becomes.

Some costs are deductible in some countries but not in others. For example, in Europe no countries except for Russia and Germany apply a VAT tax to domestic air travel. To further complicate matters, when filing for a tax reclamation, most countries will require you to submit the actual receipt (or a PDF of it) in the respective country's language. 

If you are beginning to feel a slight twinge of alarm, you aren't alone. According to KPMG International's 2012 Benchmarking Survey on VAT/GST, this area continues to be under-resourced, undermanaged and undermeasured by the majority of global businesses. Most of the businesses surveyed (59 percent) have between one and 10 full-time VAT/GST specialists, and one-quarter have none at all.

No one is disputing the value and increased revenue that business travel can bring. But when you consider that in many global businesses, VAT/GST throughput is between $1 billion and $10 billion, you can see most businesses lag where they need to be. As a result, they are missing out on a huge opportunity to improve their bottom line.

As a decision-maker in your organization, you need to ask:

• Who in your business is responsible for managing this increasingly complex, challenging and financially significant global tax obligation?

• Do you have the appropriate skills and resources in place?

• If so, how can you assess how efficient and effective you are at managing this obligation and drive best practices throughout your business?

Managing Payment And Expenses  

You may have also discovered that corporate cards for business travel purchases are the norm in the United States, but they are not in other countries. Cash advances are very common in companies that do not use automated expense management or issue corporate cards to traveling employees. Such companies also are more likely to use billbacks or central billing arrangements. This means that customers are often paying by invoice, which can create cash-flow problems for travel management companies.

While expense systems are available, they aren't widely deployed in many countries even at larger companies. As a result, employees are manually compiling and submitting spreadsheets to report their expenses. As with any manual process, there is the inevitable increased likelihood of human error—translating into profit leakage and higher costs from noncompliance.

Tricky Travel Allowances  

Another difference among countries are tax rules regarding per diems. In one country, a per diem might be considered as payment and in another it might not. That leads to differences in how per diems are taxed. For example, Sweden is very aggressive regarding fiscal claims on per diems. In the Netherlands and France, governments are still working out the fiscal implications of per-diem allowances. Such allowances can be complex and cumbersome because a traveler must calculate the number of hours they travel, and some have industry-specific requirements.

Managing this kind of complex paper trail means you'll need an expense management solution in place that provides management of both electronic and hard-copy paper receipts, including auditing services to review and approve them, as well as retention and storage.

How can you assess if your organization is on top of all this? In spite of the complexities of international travel and expense management, there are technology solutions available today to facilitate VAT management and compliance, managing payments, expense reporting and travel allowances.

As you explore options, consider an integrated solution that is easily implemented and runs on top of your existing systems. Depending on your current needs and growth plan, consider working with a provider who can offer more value-added services, including established global customer call centers, corporate card administration, system administration, policy and process management, reporting and receipt tracking.

Other key traits to look for in a partner include: How long have they been in business? Can they offer a truly global and integrated, end-to-end solution, powered by advanced analytics that help you transform your data into smarter decisions?

Ultimately you'll want a provider that works to help you manage a wide range of in-country requirements—empowering you to go global and bring sustainable value that transcends short-term cost efficiencies.

The report originally appeared in the June 18, 2012, issue of Business Travel News. 

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