4 minute read 24 Sep 2019
People travelling by ship

How the finance department plays a central role in international growth

By Ludovic Deprez

EY Belgium Financial Accounting Advisory Services Partner

Someone who enjoys/lives 8 days in a week in order to get a perfect balance between work, family, sport & party.

4 minute read 24 Sep 2019

When a company wants to invest abroad, the finance department plays an important role. What is the impact of internationalization on finance policy?

Results from the CFO Barometer show that the finance department keeps its finger on the pulse during the internationalization process. The finance department measures the financial pressure of current issues in companies and confirms that moving borders is not a simple matter. Aligned processes, digital collaboration and an eye for efficiency improvement are crucial.

  • CFO Barometer

    The CFO Barometer is an independent research initiative of the editors of CFO Magazine in cooperation with EY Belgium. A questionnaire concerning an actual CFO topic was answered by a representative sample of around two hundred Belgian CFOs from medium-sized to large multinational companies.

    The focus of the CFO Barometer is local, so the results are very representative of the Belgian market and as such the CFO Barometer becomes a benchmark tool for the CFO active in Belgium. The results are shown here and commented on by specialists and illustrated with practical experiences.

No international growth without strategy, no strategy without finance

90% of the CFOs interviewed state they are active internationally. The export of products plays an important role in this. After all, the internal market is quickly saturated, so that companies also focus their eye on international markets.

Within a company, the finance department always plays an important role in measuring performance, formulating an answer to key questions about risk management and return on investment. There will be no green light without a financial return. Finance therefore plays a significant role in the decision-making process, but the vision and strategy of a company remain the guiding principle.

Many challenges, from cash pooling to due diligence

Companies that are on the take-over path and which need cash to invest, go to a cash pooling structure. They transfer the money from foreign entities to the Belgian main account for smooth management. After all, one central account is more interesting to get advantageous rates from banks and to release funds.

The financial integration following an acquisition requires the necessary resources in order to increase the value of the acquisition. If people and resources are inadequately involved, there is a danger that local customs will not be respected, which threatens employees to be leaving the company.

Finance plays a significant role in the decision-making process, but the vision and strategy of a company remain the guiding principle.
Ludovic Deprez
EY Belgium Financial Accounting Advisory Services Partner

Supporting local business lines is therefore very important. Is there sufficient IT support locally? How can the corporate culture continue to be respected? How do local employees deal with customers? Carefully answering these questions ensures that new and existing customers come and stay on board.

A due diligence audit in the field of finance, legal and tax ensures clear rules. Finance is and remains the link between management and the assets of the company.

Focusing on efficiency pays off, also with regard to personnel duties

After the financial crisis in 2010, many companies questioned themselves in terms of income and expenses. Products and services were evaluated. Unfortunately, redundancies took place in some departments.

Currently, ten years later, there is growth again. That means more administration, more support, serving more regions and countries. This extra work can be completed by the same number of employees if the company is fully committed to digitalisation.

With growth, it is not always necessary to attract new employees. Work tasks can be redistributed or replaced by Robotics Process Automation (RPA). The fear of the term robotics (computers that take over processes) is unjustified. RPAs are standard tasks that code the entire flow. People assume that work will disappear, but new technologies make things easier and create new work opportunities.

Adapted and centralized IT systems, with big data as the core component

65% of the CFOs interviewed confirm that the IT infrastructure grows along with the growth of their company. However, we note that many companies are not yet working on digitalisation. The implementation of a new IT system often leads to half a year of shadow work, meaning people have to work simultaneously with the old and new systems.

In the centralization of services, accounting and controlling generally score best. Recruiting and the payment of wages can perfectly be done centrally because it involves the same process. Taxes and co are determined locally.

The visualization of big data stands out as an extremely valuable new technology. This is logical, because every company knows it is sitting on a mountain of data, both financial as well as operational. But it is equally important to use that data in a useful way. If a company draws the right conclusions when reporting, people gather important insights and establish crucial connections.

Risk management in internationalization is high on the agenda

Risk management is high on the agenda of CFOs that operate internationally. This means that predictions made are negatively influenced by potential risks. A company will, for example, incorporate controls to block excessive budget expenditure, both locally and centrally. In this way they prevent incurring expenses that do not fit with the general business plan.

With internationalization, financial risks (at 85%) are also at the top of the risks to be monitored. Control over spending remains essential within all departments of a company. Naturally, compliance, legal or operational risks are also important to monitor. After all, managing legal or operational processes means that fines or unnecessary operating costs are avoided.

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International growth requires solid preparation. Risks must be mapped as extensively as possible. In addition, everyone in a company must remain alert to opportunities and challenges. This is the best guarantee for successful growth abroad.

About this article

By Ludovic Deprez

EY Belgium Financial Accounting Advisory Services Partner

Someone who enjoys/lives 8 days in a week in order to get a perfect balance between work, family, sport & party.