In this unusual and uncertain business environment, many organisations are looking at protecting their longevity by saving costs and reducing expenditure. A strategic approach is needed rather than a blanket cutting of costs across your overseas business.
Although challenges like the global pandemic can have immediate and worrying impacts on your company finances, a calm and methodical approach to reviewing costs is key to long-term improvements.
In this week’s blog, Mauve explore some ideas for optimising your overseas company cost reduction and long-term business outlook.
CARRY OUT A LOCAL OPERATIONAL COST REVIEW
Look at the “good” costs that have a benefit to the business in terms of increasing sales and exposure. Then explore the “bad” – the costs ebbing away at your profits. Is any of your local expenditure unnecessary? Are you paying for an office when many of your staff work from home or out on-site, for example?
Mauve’s Local Operational Cost Review service can explore the costs you are laying out locally relating to human resources. The report will make recommendations for potential savings, such as governmental support options, or improvements to your HR efficiency. The reports are bespoke to your needs, and offer advisory support upon which to base a cost-cutting strategy.
REDUCE, REMOVE AND CONSOLIDATE CHARGES AND PENALTIES
Once you have established the bad costs, you should begin minimising or removing them from your expenditure altogether.
For companies operating overseas, we often find that naivety, lack of proximity and inefficient processes cause key avoidable expenses. These include unnecessary charges, late payment fees or penalties for incorrectly-executed HR functions. Sometimes, overseas companies are exploited by local accountancy or legal partners and charged fees for services that are unnecessary or inflated beyond local industry standards. Shop around for quotes or engage a reputable global solution provider like Mauve Group. Trustworthy suppliers can provide benchmarks for you – or give access to their own vetted local partners.
Banking can be a focus area for cost-saving. If, for example, payments are being transferred from one home currency bank account to one in a local currency, you may incur a charge from the bank. Coupled with unfavourable exchange rates on the payment, avoidable extra costs can stack up on every transfer. Charges can be avoided or consolidated through better FX partnerships, opening a local account or finding someone to make payments on your behalf. Mauve Group offers better rates and faster payment timescales through our FX and global payments partner, and our global network of entities.
MOVE TO AN EMPLOYER OF RECORD MODEL INSTEAD OF MAINTAINING COSTLY ENTITIES
Maintaining a local entity brings with it expenses and fixed business costs, depending on the entity type and country. If the revenue brought in is not covering entity costs, or the pressure on your other entities to fund this overseas company is becoming too great, you may be considering closure.
Surprisingly, this does not have to mean terminating local staff. Where possible and compliant, local staff could be moved to an Employer of Record solution. The costs associated with EoR services are often lower than those of maintaining a local entity and associated registrations. You can still manage the day-to-day operations of the worker while Mauve handles their local employment, payroll and compliance. Find out more HERE.
EXPLORE TEMPORARY STAFFING SOLUTIONS
Temporary personnel resources can reinvigorate your local business at lower cost and commitment than taking on permanent staff members, provided it is compliant to do so in that location. These solutions can optimise your local expenditure by fulfilling your immediate needs, covering resource gaps and boosting local revenue potential. However, compliance in this area should not be ignored – misclassifying workers is heavily penalised by the authorities. Mauve Group can offer advice on your temporary staffing options – for example, whether there is risk of disguised employment if engaging a contract or casual worker in a temporary or freelance role that is locally defined as employment.
For fixed term contract staff, Mauve Group can provide employment solutions to solve your interim business needs in some circumstances. Independent contractors or freelancers can also be hired to carry out short- and medium- term projects for you locally, such as software developers to build a new online customer platform. To avoid compliance risks such as disguised employment and associated penalties, Independent Contractor Compliance reviews can be useful. Services under this umbrella check registrations and benchmark your freelancers against local governmental definitions. Mauve Group can also act as an Agent of Record if the worker is deemed an independent contractor, processing invoices and payments on behalf of the client and worker.