CFO: Pay closer attention to payroll during global expansion

June 22, 2022 | 5 Mins Caitlyn Simons

Payroll is sometimes low on the priority list for CFOs at multinational companies around the world. One of the reasons for this is the diligence and expertise displayed by global payroll professionals on a consistent basis, they are a very focused group of professionals who do not often make mistakes. The result of this is that the CFO can sometimes assume that this is one of those business-critical functions that more or less takes care of itself.

But during periods of hyper growth or aggressive expansion, many CFOs are starting to become aware of the need to pay closer attention to global payroll. More countries mean more employees on the ground who need to be paid. There is a lot more data and a lot more systems involved. Perhaps, most crucially from a CFO and finance operations perspective, there is a whole new level of compliance and local country tax, labor law and regulation to be dealt with. Any failings in this area will most definitely fall under the remit of the CFO department.

In this article we will take a look at a few reasons why CFOs need to be paying closer attention to global payroll during times of peak growth activity or scaling.

Monitor compliance

All payroll is essentially local in nature because it is delivered by local payroll providers located in the country where the company employees are also located. This is usually a necessity as local country expertise can help global employers and business leaders avoid crucial pitfalls around regulatory compliance and legislation failings, they need to engage with local experts, and they do so all the time.

During periods of hyper growth or major expansion, companies can move into new markets and territories quickly and this can mean a large number of employees come onto their books across a number of different countries. Understandably, this represents a major compliance challenge for risk management, as local labor laws and regulations need to be adhered to in these new countries and the CFO needs to have a firm handle on proceedings so that they can feel fully reassured that their compliance obligations in these new regions are being met.

In situations like this, it is important that the CFO realizes that they must have regular conversations with their centralized global payroll managers. CFOs need full visibility and control over compliance, as well as putting together a process for audit trails that proves their compliance obligations have been met, these factors are all important when it comes to having a successful business strategy.

It is the CFO who will be held responsible for complying with these local, in-country tax, compliance, and regulation laws, so ensuring that the payroll department within their company has access to everything they need to make sure they are sticking to their compliance obligations is crucial. These payroll professionals need to be able to communicate and work with local payroll providers to ensure all of their payroll calculations are correct. The CFO will seek reassurance that this is all being done correctly and that the company is not being put at risk of failing to uphold their compliance responsibilities.

Cost management

An obvious one for sure, but cost management challenges and responsibilities only grow and increase when a company is moving into new countries and territories. The cost of global payroll is usually a company’s largest expense, and this expense only grows when you hire new people in new countries and becomes more complicated as you have employees operating in multiple countries with various compliance laws. For a CFO, they want to try and avoid any disruptions that can be caused by business growth and expansion, by always being prepared in their financial planning.

The chief financial officer and their surrounding finance teams will always want to closely monitor the largest costs associated with the company. It is sometimes the case that a company moves so fast into a new territory, that the paperwork and processes are not put in place to create the level of visibility, data and real-time reporting needed by the team of finance leaders and the CFO to monitor cost activity in these new countries. No CFO wishes to be caught by surprise by unexpected costs, but this is a distinct possibility if the CFO is not monitoring what is happening with payroll in each of the new countries that the multinational is operating in.

Global payroll data and reporting will be needed for this level of monitoring and control. This reporting can show what is being spent on employee salaries in these new countries, what additional payroll elements need to be considered for cost management, such as local country deductions or benefits and even highlight if there are any other countries in which the company could locate employees that would prove to be more strategically and financially advantageous.  All of these are questions that the CFO will want answered and they will need help from the global payroll department to deliver the level of data, metrics, analytics, and analysis required.

Put the technology in place

Company expansion involves new employees, new local country payroll providers, the systems they use, new data and reporting requirements. All of this is likely to be a big ask for the existing global payroll team to manage. They will need assistance in the form of technology stacks and perhaps a digital transformation that is designed specifically to meet the challenges around global payroll when scaling at pace.

The CFO will be the individual who signs off on the purchase or investment in any technology solution or platform initiatives that can help the organization better manage their global payroll. If growth is expected to continue for several years, then it is best to establish a technology platform to manage global payroll. By having a system that supports automation then perhaps such a technology platform has the advantage of helping to deliver the actual payroll and ensures that the employees on the ground in these new countries get paid. But it will also likely come with the data and reporting tools needed for operational oversight, financial services management and understanding of both costs and compliance in these new countries.

Most CFOs will find out when they speak to their global payroll professionals and leadership team, that there is an urgent need for this new level of innovative technology, especially in growing organizations that wish to optimize all of their processes. Many professionals are struggling to pay the existing employees that they currently have, and they have serious concerns about moving quickly into new countries without a supporting technology platform that helps them manage it all with visibility and control, while also enabling the level of reporting needed to meet the inevitable requests from the finance operations team and the CFO for data and reporting metrics around payroll costs and compliance confirmations.

Therefore, investing and implementing in new payroll technology can have a lot of benefits when it comes to global payroll management and will also be able to help the CFO in their responsibilities and decision-making, as well as offer the right reporting and insights when it comes to managing the global expansion of their company.

 

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