Global Spend Management “Gotchas” Part 1

A lot of spend management solutions present themselves as “global”. But a quick dip into the fine print will reveal that not everything that glitters is truly global (see what I did there?).

First off, let’s define “global”. For the purposes of this discussion, global means “able to serve companies, subsidiaries or entities incorporated outside the United States. For example, an Australian widget manufacturer; the British subsidiary of a multinational company based in Japan; or a German software company that was recently acquired by an American software giant. 

It will come as no surprise that these “global” entities are very likely to be legally incorporated in the country where they operate. 

The Challenge

Let’s take the last example: The German software company that was recently acquired by the American software giant. 

It will come as no surprise that the German company is incorporated in (wait for it) Germany. It takes time to fully integrate recent acquisitions, so for the time being the parent company’s finance team just wants to get visibility and control of the Germans’ spend, and simplify the process of getting all the expense data into the global books every month. 

What They’ll Claim 

A fully global spend management solution shouldn’t be too much to ask for, right? Many solutions claim to support global businesses by offering multi-entity support, along with local currency cards. Perhaps they even offer funding and settlement in local currencies. 

“Gotcha!”

The finance team starts to evaluate modern, integrated card and spend management solutions. A couple of them look like they could be the perfect solution. Yippee!  

But what many account executives fail to mention is the fine print around funding “global” entities. Sure, they can fund the Germans’ cards in Euros. But only from the bank account of a company incorporated in the United States. The German subsidiary can’t fund from their own bank accounts — even though they’re at American banks. 

Don’t believe us? Check out what one disappointed customer had to say about one such spend management provider:

But they’ve signed the papers and already started integrating your ERP. How can they fund the Germans’ cards? You guessed it. The dreaded INTERCOMPANY TRANSFER. 

Why It Matters

There’s a reason Deloitte calls it “the mess under the bed.” The Journal of Accountancy says it’s a process that creates “serious and costly” problems for growing and established companies. Intercompany accounting is time consuming, error prone, and generally a huge pain in the you-know-what. 

So while they addressed the original set of challenges in the example above, they added on a new set that includes governance and policies, transfer pricing, data management, transaction management, netting and settlement, reconciliation/elimination and reporting. All the stuff they were trying to avoid in the first place! 

What to Ask to Avoid the “Gotcha!”

As a global-first product, we’ve seen this play out many times with customers moving from competitors. To avoid the nightmare “Gotcha!” above, make sure to ask the following questions when evaluating “global” spend management vendors: 

• How do you support global businesses with multiple entities? 
• Can I fund my account from a foreign entity’s bank account? 
• Do you require a U.S. entity to fund accounts? 

But Funding Isn’t the Only Problem…

Once you’ve found a global solution that will work with you for easy funding (free of any intercompany transfers), there’s the not-so-small matter of multi-currency support. 

But we’ll deal with that in the next post.

Learn more about how Mesh offers truly global support for enterprise businesses.

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