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How to Strengthen Your Financial Controls for Global Payments

Cross-border payments entail a host of regulatory, legal and technical challenges that can overwhelm companies.

Chief Operations Officer

Manish Vrishaketu is the chief operations officer at Tipalti, a payments automation software company that helps businesses manage their entire supplier payments operations by streamlining all phases of the AP and payment management workflow in one holistic cloud platform. Manish’s 18 years of payments and fintech experience include leadership positions at GoSwiff, Fiserv, and CashEdge.
Manish Vrishaketu is the chief operations officer at Tipalti, a payments automation software company that helps businesses manage their entire supplier payments operations by streamlining all phases of the AP and payment management workflow in one holistic cloud platform. Manish’s 18 years of payments and fintech experience include leadership positions at GoSwiff, Fiserv, and CashEdge.

Pixabay, Gerd Altmann

Payments to foreign suppliers present a series of major challenges for accounts payable (AP) departments. There are more than 26,000 global payment rules to consider and over 140 payment methods including prepaid debit cards, international ACH, and wire transfers.

The best options for ensuring secure, available, and reliable payments depends on the supplier’s expectations and location, and choosing the wrong one can strain relationships and create additional costs in terms of time, money, and labor. Every payment method has benefits and drawbacks, of course, but research by Levvel found that some of the most common solutions are inefficient and expensive.

The complex regulatory web entangling global payments can leave even the most experienced AP professionals scratching their heads. But with 73% of American companies making cross-border payments and the value of e-commerce expected to exceed $4.6 trillion by 2022 according to the European Payments Council, business leaders need to put the right infrastructure in place to comply with international tax and regulatory requirements.

The Complexity of Global Financial Controls

Payment processes vary from country to country, and businesses need to ensure their payment data is accurate. Multiple banks and channels may be needed for cross-border disbursements, and reconciliation processes need AP departments to use different measures than the ones they use for domestic transfers. On top of that, exchange rate fluctuations can add an element of confusion to any transfer.

Cross-border payments are also subject to greater scrutiny from tax and regulatory bodies. The Foreign Account Tax Compliance Act mandates U.S. taxpayers to report interest and dividends payments made to foreign suppliers on U.S. securities, and W-8 (Series) Forms need to be filled in. And the Office of Foreign Assets Control also maintains a “Do Not Pay” list that has to be consulted before making any new payments.

How to Avoid Mismanaging Global Payments

The complexity of global regulations and requirements can lead to late payments and other problems for AP departments. The challenge is especially serious for small businesses working with large numbers of suppliers. Every invoice needs to be reconciled with its payment order and dealt with in good time.

Failure to meet these obligations can create cash-flow shortfalls and undermine business forecasts. But these obstacles are not insurmountable. The following steps can strengthen a company’s financial controls during global expansion and avert regulatory catastrophe:

1. Enlist specialized processes and teams for international payments.
Maintaining separate domestic and cross-border payment runs eliminates some of the difficulties of manual processing. Still, avoiding global mismanagement requires tighter accounts payable governance.

Put the right AP structures in place and hire employees with specialized knowledge of international payments. Effective systems and competent personnel will mitigate the risks associated with global payment, reduce complexity, and cut corporate costs.

2. Invest in compliance support.

Accounts payable departments shouldn’t be left to manage the burden of global payments alone. Invest in a technological solution or designate a team to assist the AP department by gathering tax forms and ID information from suppliers upfront. Whether it’s a W-9, W-8, or VAT form, it’s crucial that payees provide the right documents from the beginning and that the information is checked for accuracy.

Compliance support will also prevent money laundering and other forms of fraud. Transaction screening aids will check payees against Office of Foreign Assets Control, European Union, and other blacklists and identify blocked and suspended payees using multiple accounts to circumvent legal controls.

3. Find technological solutions.
Businesses looking to expand globally can utilize global payment software solutions that automate both cross-border and domestic payments and streamline tax and regulatory compliance processes. Fewer resources will be needed to manage the AP process and processing accuracy will improve.

The best electronic data interchange software will even optimize the timing of payments to take advantage of fluctuating exchange rates and other available discounts that no human could track, according to Deloitte. The financial savings could be significant.

Global expansion is enough of a challenge without having to navigate the minefield of international payment regulations and laws. But business leaders don’t have to find the way alone. The right people and processes, compliance support, and technological solutions will all help to clear the path.

Manish Vrishaketu is the chief operations officer at Tipalti, a payments automation software that helps businesses manage their entire supplier payments operations by streamlining all phases of the AP and payment management workflow in one holistic cloud platform. Manish’s 18 years of payments and fintech experience include leadership positions at GoSwiff, Fiserv, and CashEdge.

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Equities Contributor: Manish Vrishaketu

Source: Equities News