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Going Global Means Understanding the Locals

  • Published on Jun 6, 2018
  • by TSCPA Webmaster
Businesses used to have to make a very concerted effort to become an international business. Today, thanks to the internet,
companies can go global without even realizing it. And what they don’t know can get them in trouble.

If you search the term “globalization,” you’ll get a variety of results, but generally, the term is defined as “a process of interaction and
integration among the people, companies, and governments of different nations, a process driven by international trade and investment
and aided by information technology. This process has effects on the environment, on culture, on political systems, on economic
development and prosperity, and on human physical well-being in societies around the world.”

Globalization itself certainly isn’t new. For thousands of years, people – followed by corporations – have been buying from and
selling to each other in far-off lands, such as through the famed Silk Road across Central Asia that connected China and Europe during the Middle Ages. Likewise, for centuries, people
and corporations have invested in enterprises in other countries.

But what is new is how easy it is to be a global company, even if you’re a one-person show. A 2016 study by USForex revealed that 58% of small
businesses already had international customers, while 72% planned to grow their international customer base. About 96% of the small
businesses said they were confident about conducting business abroad.

Forming a Network

As Audit Director for BKD and a Hong Kong native, HCPAS member Allen Wong, CPA, has seen the good and the bad that comes with doing business
in another country. “What we see as ‘normal’ here in the U.S. isn’t the same in other countries,” he says. “I’ve been to a lot of conferences and
meetings with professionals around the world. We discuss everything from regulations to culture to legal issues. We need to keep learning and
educating ourselves so that we can keep serving our clients.” That’s why preparation is everything when it comes to doing business in another country.
“To me, it’s like networking around the world,” he explains. What we’re doing now is more complex, diversified and challenging. It’s not only about
accounting, but also how we’re going to work with a team of people with different backgrounds in different offices, different companies and
sometimes even different firms. We’re all coming together to provide the professional services our clients want and need.” BKD is a
member of Praxity, an international alliance of independent accounting firms. The alliance gives member firms worldwide access to the
expertise needed to help clients wherever they want to do business, whether that’s a merger in Asia, a real estate venture in Eastern Europe or
opening an office in South America. Wong says forming specialized teams is critical. One firm can reach out to another when
specific advice is required, giving clients the benefit of specialist technical skills and objective guidance when developing or
initiating business in an established or emerging market. “We’re able to work closely with different firms so we’re ready to
help clients at any time,” he says. “Other firms can provide us with updates on regulations and laws that might benefit the client. We can then
educate our clients so they can make better business decisions overseas." Wong is preparing to head overseas to hold a
series of educational presentations for other accounting professionals and client prospects to help them understand how the Tax Cuts and
Job Act (TCJA) might impact them. “They may have tax planning they need to prepare for, and they may benefit,” he says. A Chinese firm
helped BKD coordinate the events. Wong says it is important to help global clients understand the very different local and
international laws and regulations in each country. “We always need to help our clients mitigate,” he says. “Regulations between
countries aren’t the same, and they’re always changing.” A partnership between companies in the U.S and China may not be the same as a
partnership between companies in the U.S. and Hong Kong, even though Hong Kong is part of China.

These nuances make planning and preparation important, requiring a lot of consultation and tax planning to make sure legal structures and
future transactions meet regulations. “Our goal is to make sure clients don’t suffer double taxation,” Wong says. “Every country wants a
piece, but we want to ensure clients don’t pay two or three times for the same transaction.”

Teamwork Pays Off

Wong’s biggest piece of advice for firms or companies preparing to do business internationally is to assemble a team to ensure
you’re following laws and regulations. “Everyone, even small businesses, can find international business resources online,” Wong
says. “But companies need to invest the time and effort to understand all of the complexities. If they don’t have a professional to help with at
least the most basic information, it could lead to trouble.” He cites an example of a client who thought it would be fine to proceed without
guidance and opened a bank account and designed a contract without an attorney. When the client ran into trouble, Wong and his team
took everything back to square one and started over again. “They just don’t know what they don’t know,” he cautions. “It can be difficult.
It’s a good idea to hire an adviser up front, or it might cost more at the end.” Even the advisers know when they themselves
need advisers. “When we’re working with clients in other countries, we always bring in an attorney,” Wong says. “We’re not a law firm
so we bring in a team to make sure a client’s legal structure is appropriate. We also form an international tax team and an outsourcing team.
We’re making sure everything is in compliance for a business.”

Building Relationships and Managing Expectations
As more companies invest abroad and more foreign companies invest in the U.S., there is more emphasis on relationship building rather
than simply focusing on business transactions. Over the years, Wong has seen companies put more resources and time toward international
business development. Although technology makes it easier to communicate remotely, he believes meeting face-to-face is still important
to help organizations learn about differences in culture and client expectations. 

Wong has encountered some interesting differences between the U.S., China and Asia. China and other Asian countries tie everything
out to the penny. Something that is material in the U.S. might not be material in those
countries. And when sensitive information is sent online in the U.S., there is far more emphasis on using a secure email or portal
website. “In other countries, it’s more casual,” Wong says. “Someone might send you financial statements using an app or by text. IT and
security are not the same overseas.”

The flow of communication through the hierarchy is also different. Wong said he has observed that especially in China, employees tend to
not communicate with someone higher up the chain of command, speaking only with the same level or lower level members of a team. In addition, all
communication may take place via ReChat, an app. “Email is less common,” he says.

We’re All Global

At the end of the day, Wong says there isn’t anyone doing business today who isn’t affected by
the ever-growing globalization of the business world. “Everyone has to pay attention,” he says. “Even
employees of small businesses. At the end, we need to make sure our clients are prepared and competitive.”