Utilize your global bank as much as you can
Brian Boyle, CTP, assistant treasurer for maintenance products marketer NCH Corporation, explained that his company is in 50 different countries and uses one global bank for many of those countries. “The advantages for that are to limit the number of different kinds of files and testing involved going to local banks in each country,” he said. “We send our payment files through our one global bank.”
Even in areas like Latin America where NCH’s global provider lacks a presence, it still can offer certain services. Boyle noted that treasury is able to use the bank to send payment files which are then distributed to the local banks NCH works with in Latin America. Additionally, in some countries, NCH uses a local branch network for collections, and then has those funds transferred over to its global bank.
In China, NCH has to work with the local banks where it keeps small accounts for tax payments. But again, its global provider provides an invaluable service. “We really just fund it right before the tax payment and keep all those funds in our global bank,” Boyle said.
Establish a strong relationship with your organization’s tax department
Stephanie Allen, director of treasury for Research Now, a market research firm, noted that as her company began operating internationally, it had a lot of issues with cash getting trapped overseas. She began working closely with tax to resolve the problem. “From then on, tax and I meet monthly,” Allen said. “We just discuss whatever she knows, whatever I know, etc. I’m invested in what type of tax plan she’s doing, and sometimes I can offer some information and say, ‘If you do this, it’s going to cost this much in Brazil or in Europe.’ So that’s my biggest suggestion with tax—develop that relationship.”
Boyle agreed that a close relationship with tax is incredibly important. “We’ve found that there are ways that we can utilize cash in countries that are cash rich and then in other countries that are not doing as well and need the cash. So we have lots of intercompany loans,” he said. “We’re constantly trying to figure out which countries have treaties for withholding taxes, etc. So we work with tax very closely on that.”
Allen added that Research Now also does a lot of intercompany loans, and tax is an invaluable ally there as well. “I work with tax on the timing of those loans—whether they’re short-term or long-term,” she said.
But depending on the time of the year and the region you’re operating in, intercompany lending can become very complicated. “In the fall, lending money from China to Singapore was easy. But then in January, it was not so easy; they wouldn’t let any money out of the country,” Boyle said. “So things change quickly, and you just have to keep up with what’s going on.”
Know what you’re really getting into
Given that the international markets are complex and ever-changing, Dan Nolan, vice president, treasury sales senior officer for Bank of America Merrill Lynch, advised attendees to stay aware of macroeconomic trends and any potential risks that expanding into a new region could present. “Get your treasury team involved early in any discussions with your global banking partners to develop a strategy for a country and really understand regulatory environment,” he said. “Have a local bank strategy versus a global bank strategy.”
Nolan noted that it’s also essential to give yourself more than enough time when entering a country. “One of the biggest stumbling points we find with our clients is the estimated time clients think they’re going to need to get set up in a country,” he said. “It’s not like you can get set up in a day or two. Some jurisdictions require quite a lot of time to get an account set up.”
Nolan added that in Asia, he advises his clients to plan for 45 days to set up an account. “But that starts when you deliver the documents to your bank; it doesn’t start when your bank sends the documents to you,” he said. “So keep that in mind: when a banker gives you a service level agreement or an estimate of the time, it means, after that person has all the documents and they hand it over to their implementation person. In general, I would say, plan 45 to 60 days.”