Alastair Borthwick Head of Global Commercial Banking Bank of America Merrill Lynch
Alastair Borthwick
Head of Global Commercial Banking
Bank of America Merrill Lynch

For many companies across the United States, growing internationally remains a top goal. Financial executives see potential in both established and emerging markets, and transportation and technology have advanced to the point where firms of almost any size can consider doing business beyond U.S. borders. Yet global expansion often brings new challenges, whether it’s navigating a new set of regulations or ensuring a team has adequate cash in a certain country.

As a result, financial officers and their banking partners have become more innovative as companies increasingly look for business opportunities in global markets.
Though it is not surprising that U.S. companies are more active internationally, a recent survey reveals how these firms are expanding their reach. The Bank of America Merrill Lynch 2013 CFO Outlook survey asked more than 600 financial officers if their companies sell to, buy from or have operations in foreign countries. Buying from non-U.S. markets was the most common response, reported by 62% of CFOs, up from 47% in the previous annual survey.

Financial officers shared similar growth in other categories, reporting increased selling to non-U.S. markets (55% in the 2013 survey versus 34% in 2012) and operations in non-U.S. markets (30% in 2013 and 15% in 2012).

When all types of involvement in global markets are taken together, 73% of CFOs said their companies had some kind of international activity — a significant increase from 54% just one year earlier.

Add to that the International Monetary Fund’s forecast that 87% of world economic growth through 2017 will take place outside the U.S., and it is clear that companies are giving more consideration to foreign markets. With that shift comes more focus on financial reporting and investment in key areas — not only maintaining access to capital but also improving visibility and control of funds, optimizing working capital and better managing risk.

Better Access to Funds with an Online Portal

As the world’s tenth largest architecture firm, NBBJ is no stranger to working on big projects around the globe. The Seattle-based company opened its first non-U.S. office more than a decade ago in the United Kingdom. The more recent opening of the company’s Shanghai office was a natural progression of that growth.
“We see significant opportunities globally, especially in Asia,” says Brenda Clark, NBBJ’s controller. But expansion into China introduced new issues. China requires companies to accept local payments in Chinese renminbi. Due to the restricted nature of that currency, this can pose challenges for non-Chinese companies seeking to move funds to accounts or operations outside the country.

This flexibility is particularly important to professional services firms such as NBBJ, which can incur project-related expenses in the U.S. but receive payment in tightly controlled foreign currencies. Financial officers at NBBJ ultimately worked with their bankers to employ new fund repatriation strategies, helping the company with its liquidity.

In addition, new technology has made NBBJ’s treasury management more efficient and transparent, even as the scale and scope of its payments, receipts and liquidity management needs have grown. An online portal adopted in recent years gives the company’s financial team easy access to several functions — something that has been vital as NBBJ engages in projects in multiple countries.

“Payments overseas often come at project milestones not fully within our control, making cash flow projections more challenging,” says Clark. Having a central portal “provides visibility into our funds and easy access to the full gamut of capabilities that we need.”

Consistency Through Corporate Cards

Another company that is active outside the U.S. and continues to advance its financial solutions is Hollister Inc., a supplier of health care products. When Illinois-based Hollister first began using corporate credit cards several years ago, it was simply to consolidate employee expenses. But though the company saw benefits in moving from paper to electronic payments, those didn’t extend to its divisions and subsidiaries in other countries.

With multiple non-U.S. locations and even more employees working abroad, Hollister truly is a global company and it needed a global card program that reduced foreign exchange costs.

The answer was a single payment solution that enables convenient, efficient and effective cash management across country borders — from Hollister’s U.S. headquarters to its European base in suburban London and manufacturing facilities in Denmark, India and Ireland. As employees in those locations began to ask for cards, the company’s accounts payable department saw the potential for greater consistency across regions while also managing travel expenses in different currencies.

“The corporate card was a foundation product,” says Sheila Johnson, vice president and treasurer at Hollister. “It had gone from just a payment mechanism to a major working capital tool that was now a big part of our accounts payable structure.”

Hollister now has cards that allow for Canadian dollars, euros and British pound sterling — the last move saving the company thousands of dollars in annual fees from a local U.K. financial institution. With the ability to settle transactions in the local currency in several countries, Hollister is mitigating its exposure to increased foreign exchange costs at a time of continued volatility.

The global card program has had other benefits. Consolidated spending greatly simplifies the payment process. A 20-day grace period before payment is due has increased the size and flexibility of the company’s working capital. And with an intuitive global reporting and account management tool provided by its bank, Hollister’s financial team can view statements, create customized reports and export data directly into its software system, plus set up new accounts, order additional cards and establish spending limits or merchant category exclusions for cardholders.

The result is an astounding increase in efficiency. Despite tripling the volume of payments it handles, Hollister’s accounts payable department includes only one full-time card administrator handling the work previously done by five part-time workers. In addition, the projected $3 million domestically that Hollister expected to save each year by moving spending to its corporate cards has become more than $45 million globally.

“What started out as a way to reduce fixed costs in the payment cycle has now become a revenue generator,” says Johnson. “It’s one of the few payments that finance can use to actually reduce expense. We call it optimizing cash-flow in support of working capital.”

Reducing Expense and Risk through Lockbox

Although expanding into international markets usually requires a careful strategy and long-term planning, it also depends on overcoming day-to-day operational challenges.

At CareerBuilder, a provider of human capital solutions for employers, international growth has relied on leveraging expansive lockbox capabilities that increase visibility and accelerate posting of international cash — freeing resources that can be deployed toward new business.

The company’s website hosts more than 50 million resumes, one million job openings and 24 million unique visitors each month. The Chicago-based company gets revenues from a wide range of sources — from large corporations to small businesses and placement agencies — and it needed a holistic, flexible approach to processing different types of payments, including ACH, merchant cards and checks. Checks especially are common in emerging markets, which elevates the need for CareerBuilder to accommodate traditional payment types.

“What we needed was a way to replicate the strengths of our U.S. lockbox program on a global scale,” says the company’s CFO Kevin Knapp. “At the same time, it was extremely important that we keep our banking relationships manageable,” he adds.

One advantage was that the organization’s international lockboxes could seamlessly integrate with its domestic lockbox infrastructure, which meant all worldwide receipts could be channeled into its bank’s online portal for easy visibility. Within about six weeks, customers were able to send payments to the new lockboxes.
Now, each day the company’s bank creates digital images of checks and electronically transmits them to the firm. A two-person team manages the company’s entire worldwide cash operations, and when the firm enters a new country it simply rolls the new lockbox into its existing process — eliminating the expense and risk of adding in-country staff.

Through this, CareerBuilder has overcome the dual challenges of handling a high volume of paper payments and winning business in new markets. Centralizing each country’s receivables via the online portal has eliminated some hassles of day-to-day, in-country operations — freeing the firm to focus on updating and executing its business strategy.

“For us, lockbox is really more than just another banking product,” says Knapp. “Since so many of our international clients pay by check, it’s really become an essential and big part of our global strategy by helping us stay flexible and focus on meeting our customers’ needs.”

More International Growth Likely

As the above examples show, many challenges can arise when a company’s growth plans take it outside the U.S. That situation will only become more common as other companies continue to add personnel in foreign countries and look for opportunities to grow global market share.
Recall that in 2010 President Barack Obama set a goal of doubling exports over five years and created the National Export Initiative to promote U.S. goods, remove trade barriers and expand access to credit. Also consider that it’s not only large corporations that do business internationally.
About 26% of U.S.-based multinational companies are classified by the federal government as “small businesses,” according to the recent American Companies and Global Supply Networks report, sponsored by Business Roundtable and other organizations. There is no reason to think that number won’t rise.
At the same time, the financial crisis changed the way companies look at the world. More than ever, financial officers are focused on bringing more information into their companies while minimizing the risks from doing business in other countries, including emerging markets. Those goals were echoed in a late-2012 Ernst & Young survey of 750 senior business executives, who said the number one drivers of globalization were technological advances and greater and quicker cross-border communications.

The world is smaller than before and the opportunities for global expansion are growing for U.S. businesses. The key for CFOs, treasurers, controllers and other officers is finding the right trusted advisors and financial solutions to successfully navigate the challenges that come with international growth. This is possible, as many companies have shown, and the visibility, efficiency and transparency that companies gain can also benefit their financial reporting and other key processes.

Reprinted with permission from FINANCIAL EXECUTIVE, (May 2013), © by Financial Executives International; 1250 Headquarters Plaza, West Tower, 7th Floor, Morristown, NJ 07960; 973.765.1000;

Alastair Borthwick is head of Global Commercial Banking at Bank of America Merrill Lynch. He is based in New York.