Why Automation Is the Perfect Partner for Global Payouts
How automated payout solutions can make global transactions more secure.
Global partnerships are becoming commonplace among businesses of all sizes. With that comes an increase in risk from global payments. Finance automation is the best way to make the payment process efficient and safe for all stakeholders, says Rob Israch, president of Tipalti.
Since the pandemic, the global digital economy has grown exponentially. As platform-based businesses try to scale to keep up with a fast-moving digital and international landscape, there’s a growing need to be able to pay digital partners across a range of different payment methods, currencies, and regions. This influx in global payouts brings with it new complexities and concerns.
Expanding operations to offer international payment options tends to come with an increase in overhead costs and resources. These include international transfer and currency conversion fees, and the staff needed to manage a global payouts scheme. The finance function also needs to be prepared for the various regulatory hurdles in each country of operation.
As a result, companies must ensure the correct payment of taxes and value-added taxes, the accuracy of financial reporting, and localized data protection regulations. International expansion also increases the risk of fraud, as companies are more exposed to international threats and fraudsters.
So, how do businesses address all these concerns around money, time, and risk while remaining competitive in the global digital economy? For most organizations, the solution lies in automated payout solutions.
Finance Automation Powering Global Payouts
Knowing where to implement automated processes is essential for understanding how automation can help businesses navigate the complexities of international payouts.
Virtual bank accounts
Manually converting payouts across global entities, taxes, and more through multiple international bank accounts can be costly and time-consuming. To streamline it, payout solutions that offer currency and foreign exchange (or FX) management tools take advantage of virtual accounts (or VAs), also known as sub-accounts.
A VA works by operating within a management system’s overarching bank account. A business funds its VA with one type of currency, and the primary bank account is responsible for currency conversions and fund transfers. In this case, a money services business (known as MSB) owns the primary bank account, with the client’s VAs serving as sub-accounts.
Details can get a bit technical, but the bottom line for businesses is that they no longer need to worry about converting cross-border payouts into different currencies and local payment methods.
FX (Foreign Exchange) hedging
With increasing volatility in the global markets resulting in extreme foreign currency fluctuations, companies with international subsidiaries would benefit from implementing foreign exchange or FX hedging programs. Like financial hedging, FX hedging helps reduce the risk of exposure to negative currency fluctuations and mitigate the impact on cash flow.
While FX hedging has traditionally only been an option for large organizations, finance automation solutions have now made it accessible to fast-growing, midsized companies; it’s ideal for managing multiple international entities.
Managing multiple subsidiaries
For companies with multiple international subsidiaries, managing relationships with various banks that strictly operate as cost centers can add unnecessary complexity to payout processes.
An automation solution can eliminate the need to maintain regional bank accounts solely for payouts, providing one central account to manage payments across all subsidiaries, currencies, and payment methods.
See More: How To Future-proof Financial Institutions with Gen2 RPA
4 Ways Finance Automation Benefits Global Businesses
Here are the primary benefits of finance automation for international business transactions.
1. Fast, reliable, and secure global payouts
The emergence of the creator economy as a primary source of income for many individuals has sparked a surge in competition among platform-based businesses. The ability to attract and retain creators as partners is crucial and one area in which competition is already fierce is payment processing. It might seem like a small thing, but in today’s digital world, people expect fast and convenient payment methods.
It’s essential, then, for an organization that wants to compete to implement a solution that profoundly understands and prioritizes the intricacies of global payments. A trustworthy payables platform should be able to automate business payments at scale, delivering fast and accurate payouts to global partners in their preferred forms and currencies. In doing so, businesses can establish trust and strengthen their relationships with creators while standing out in a competitive marketplace.
2. Self-serve functionality
A self-serve portal or back-end can transform business operations, bringing unparalleled efficiency and automation to an organization’s payout processes. By offering partners increased control, transparency, and visibility, a self-serve portal enables them to initiate transfers, edit payment details, schedule recurring payouts, and monitor payout statuses in real-time.
Automated proactive communication via email, text messages, and even push notifications through a smartphone application adds another layer of transparency and visibility, strengthening partner trust.
A self-serve back-end doesn’t just benefit partners, either. It also alleviates employee workloads by allowing partners to answer their own payout inquiries and can even eliminate the need to add additional headcount to support a growing partner base.
3.Taxes and regulatory compliance
Navigating the complexities surrounding taxes and regulations can be frustrating and cumbersome. Moreover, the complexity of tax logistics and regulatory compliance can create an unfavorable partner experience, potentially damaging business relationships.
Automating the collection of tax details and generating essential documentation, such as W-9, W-8 BEN, and 1099 or 1042-S forms, can significantly simplify the process for partners. This innovative approach provides a streamlined and efficient way for partners to obtain the necessary documents they need come tax season. This allows businesses to strengthen partner relationships and focus on growth and innovation by removing the complexities surrounding tax compliance.
4. Financial controls and fraud prevention
Expanding a company’s operations abroad increases the likelihood of exposing the business to fraudsters and scammers. Payment fraud is a risk faced by companies of all sizes and industries, regardless of payment method and currency.
A trustworthy payables solution strengthens internal processes with enterprise-grade financial controls to safeguard against malicious activity and fraud loss. More specifically, it could be used to combat fraud associated with global payouts. Fraudsters know teams are short-staffed and overworked at companies of every size, and they don’t discriminate when targeting the unsuspecting. To combat fraud effectively, businesses must invest in educating employees or in robust technology to stop fraudsters. Unfortunately, most companies only act once it’s too late.
Automation allows businesses to control the partner payout experience by setting up rules and limitations, such as minimum required threshold amounts, prescheduled payout windows, fee coverage, and more. These rules can help prevent fraud and mitigate the risks associated with global payouts.
Automation allows small and medium-sized businesses to compete at the scale of global and mature corporations without needing to hire additional headcount or spend time and money managing international assets.
In a world where global partnerships will only become more common, now is the best time for businesses to embrace automation.
What benefits of finance automation are you leveraging? What challenges are you facing therein? Share with us on Facebook, Twitter, and LinkedIn. We’d love to hear from you!
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