Picture this. You’ve poured years of blood, sweat, and tears into your business, and it has paid off. The company is growing, customers are happy, and the takings can squeeze a smile out of you on even the toughest of days. Since you’re on a winning streak, you’re thinking it's time for the next challenge—expanding overseas.
Great idea! After all, the cross-border eCommerce market is set to reach a jaw-dropping $3.37 trillion by 2028, and 63% of B2B businesses like yours are planning to expand internationally too.
Except, overcoming financial obstacles tied to cross-border commerce and organizing all the moving parts makes you second-guess your decision.
If this scenario sounds like your reality, you’re not alone.
So, don't pack away your dreams of international expansion just yet. Instead, it’s best to examine the financial challenges B2B businesses have faced while expanding internationally and how they overcome them to equip you with knowledge, strategy, and confidence.
In this blog post, we’ll pinpoint the financial roadblocks you may encounter as you journey to new territories. We’ll also equip you with a checklist of financial to-do’s for a smoother ride.
Table of contents
4 Common financial roadblocks on a cross-border journey and how to get around them
Your financial checklist for cross-border expansion
The right way to fuel up for profitable international expansion
4 Common financial roadblocks on a cross-border journey and how to get around them
Managing business finances is challenging, but when you add the variable of international operations, complexity and issues can skyrocket fast. To get prepared, let’s look at some common financial problems when going cross-border and how to fix them.
Roadblock #1 - Setting up payment methods B2B buyers actually want
There’s a phenomenon in the B2B space of letting customers Pay by Invoice or on account, with as much as 95% of B2B buyers preferring this payment method. So, as you go global, the challenge will be providing customers with the payment options they desire cost-effectively and efficiently.
The solution - An optimized B2B payment stack
Before you launch in a new country, research the credit and payment methods B2B buyers typically use. Then, find modern, robust, and affordable solutions to facilitate your target buyers desired payment methods and make transactions quick and easy. Your efforts won’t be in vain. Businesses that improve their payment journey see a 5%-20% uptick in revenue (more on this later).
Roadblock #2 - Bills, bills, bills
New markets hold countless treasures like new customer pools, accessing more prosperous markets, and diversifying your income streams to reduce risk. However, a common challenge is footing the expansion bill. Starting afresh in a new country doesn’t come cheap, and you’ll need to be ready for the phantom costs that can jump out suddenly.
The solution - Revenue generation and profit saving
The remedy here is to calculate your business’ cash needs, add a 20%-30% buffer, then get selling. But most importantly, save a portion of your profits until you reach your target. For instance, you could also launch a product line in your current territory or hold sales and promotions to liquidate stock faster and then allocate some profits from the proceeds to your expansion.
Roadblock #3 - Maintaining high team morale and skills
Your team’s preparedness may not seem finance-related a first glance, but can actually have a huge effect on your return on investment. Expanding internationally is no small feat, and while rewarding, it’ll be a long, hard slough to the top.
Solution - A winner’s mindset, strategic hiring, and budget for ongoing team training
Ensure your team is ready for the challenge by hiring the right people in your chosen territory and making room on your existing team’s calendars to handle the additional workload. It’s also important to provide training for any new responsibilities and have a budget for ongoing support like additional staff during peak seasons and learning and development initiatives. Employers that invest in employee development see a 218% increase in revenue per staff member and a 24% increase in profitability.
Roadblock #4 - Building a brand
Another challenge you could face is building a brand from scratch, which, trust us, is as expensive as it sounds. Not only will you need to validate your new target buyer’s wants, needs, and buying behaviors, but you’ll also have to convince buyers to purchase with little to no brand recognition. As a result, you may experience high marketing costs and lower conversion rates, which impact profitability.
Solution - Outsourcing branding and marketing to generate revenue and brand recognition
While the jury is out on how long it actually takes to build a brand, the figure seems to sit between 2-5 years. During this time and beyond, you’ll need to deliver products, services, messaging, and content that aligns with your core mission to deliver. So be ready to cover the costs for branding and marketing in your chosen region for the time it takes to build a recognizable brand.
Your financial checklist for cross-border expansion
With the right action plan managing your business's finances while expanding internationally doesn't need to be complicated. But what financial tasks should you prioritize? Let’s run through a list of to-dos.
Decide which currencies you’ll accept
When serving customers in new territories, you’ll come to a crossroads which is picking which currencies to accept. There’s a trade-off between accepting local currencies, which is probably what your customers would like—and selling only in local currencies, which can be cheaper but will dampen the customer experience. So, in each scenario, it's important to:
Know what currencies are used most in the countries you’ll trade in.
Ensure it’s financially and logistically viable to use specific currencies.
Outline how currency conversion would work for you and your customer.
Create a plan to manage the additional costs of sending funds abroad
If you’ve got suppliers or partners overseas, you’ve likely sent a payment or two overseas without needing to study the costs excessively. But as you go global, you’ll be sending money abroad more regularly, especially if you maintain international vendors and staff. So it pays to understand the additional costs you’ll incur with money transfer services.
Two popular methods for sending money overseas are Society for Worldwide Interbank Financial Telecommunications (SWIFT) payments and Single Euro Payments Area (SEPA). With SWIFT, you’ll also need to decide whether your business or the beneficiary takes on the fees.
To send money internationally, your bank will charge a fee for SWIFT transactions, typically around $20-$30 for online transactions. You’ll also have exchange rates to consider, which often include a markup, and intermediary fees could apply depending on how your payment is routed. For SEPA transactions, on the other hand, banks charge little to no fees. However, payments are restricted to 36 countries in the EU, and currency conversion rates vary from bank to bank.
To put this point into perspective, let’s imagine you trade in France and get your inventory from Italy and China. In this scenario, you could look like using SEPA to send funds to Italy and reserving SWIFT your China-bound cash.
Identify preferred payment methods and simplify local payments
As you expand operations into more territories, you’ll likely have payables and receivables in different currencies. So a top priority should be optimizing your payment processes for paying bills and receiving funds.
Use a digital wallet that can hold multiple currencies simultaneously and offer your business local IBANs in the countries you trade-in. The pros of this move are twofold. You’ll serve buyers' preference to pay a local IBAN, boosting your customer experience conversion rate. Plus, you can transact like a local, reducing fees for your business and buyers and cutdown admin time. This approach alone can make your operations more productive and profitable when you consider 50% of B2B professionals spend 6-10 hours per week managing B2B payments.
Use reputable data sources for credit risk and fraud assessments
While you’ll be tempted want to focus on revenue-generating tasks like sales and marketing in your cross-border takeover, you also need to complete the not-so-fun but essential tasks like credit checks and fraud prevention. In a global market that’s constantly changing, these initiatives will be essential to reduce your business’ risk exposure and protect its funds.
Ensure you have the best data sources on hand to conduct your due diligence. The reputable companies vary from region to region. For instance, in Europe, data sources like Moody’s Analytics and Schufa are the authority. So research the available option, examine tier data processing methods, read reviews, and test drive solutions to find your match.
Build a multifaceted payment stack customized to buyer preferences
B2B buyer payment preferences not only include local and alternative payments like digital wallet payment and open banking transfers but also the ability to Pay By Invoice on Net Terms. For example, in Western Europe, trade credit is used in 55% of B2B purchases and 45% of B2B purchases in Eastern Europe, with the remaining 55% made in cash on average.
So to keep customers engaged throughout the checkout process, it's essential to build a multifaceted payment stack that includes:
Cash payment options: Implement solutions that allow payment in cash at partner locations like Remitly, Raypd, and Thunes.
Alternative payment methods: Use solutions like IDeal, Bancontact, and Adyen to offer rapid online payments.
Buy Now Pay Later solution: In particular, your BNPL solution should be made specifically for B2B, have wide geographical coverage, high approval rates, and great user experience. (Need more info? Check out our guide on what to look for in a B2B BNPL solution).
For instance, Sprinque offers real-time credit decisions at checkout using a simple three-step process involving business verification, fraud screening, and creditworthiness assessment, doesn’t require users to create an account, has high approval rates, and buyers can choose how they pay.
Create a collections process
No matter how hard you try to avoid late payments and defaults, do business long enough, and you’ll learn they can and will happen. In 2023, 49% of B2B invoices were paid on time, and 6% became bad debt.
So, as the saying goes, “Hope for the best and prepare for the worst”. Understand the laws on collection in the country you’ll be operating. Have a process in place to increase the odds of recouping your funds, gather contact details of reputable collection agencies in the country you’ll be trading in, and reduce your risk exposure with adequate insurance cover.
The right way to fuel up for profitable international expansion
Going global is an exhilarating journey filled with opportunity. But how you anticipate and handle your business’ financial responsibilities and requirements will determine how well your business fairs. So, set yourself up for success. Establish a realistic budget, maintain adequate cash flow, and make payments easy for customers and your team to ensure your numbers always add up. In time, your cross-border dreams will be a reality, and you’ll be plotting your next challenge.
Good luck!
Ready to revamp your B2B payments? Find out how Sprinque can help. Book a meeting today to dive deeper into the cross-border payment solution.
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