Five things any CFO must keep in mind when beginning a startup’s internationalization process

As a startup grows, one of the natural steps is beginning to internationalize its operations, mainly by trying to find one of the most attractive markets to gain a strong regional position: Mexico, Brazil, Colombia, etc.

If your startup is already on that path, you should take into account some tips when landing in a new market: 

  1. Find the right professional service providers for your needs (accounting and law firms):

It’s very important to seek advise from colleagues that have already undergone the process of opening a new market, so as to reduce the risk of not finding someone that suits your needs. Besides having those references, it would be ideal if you could travel and meet their team of professionals and offices, in order to get a good impression of who will be taking care of your operations. 

  1. Before opening a bank account, analyze the services and costs involved in the different choices available in the country where you are landing.

A common mistake is opening an account in the first possible bank, which may bring up a few problems when it comes to launching operations. Even though banks may be the same as those in your country of origin (Santander, BBVA, Itaú), they frequently use different platforms in different locations. 

There is a likelihood that Bank A may have an automatized process to handle your wire transfers whereas Bank B only allows transfers through batch payments. Or it may be case that one bank charges a commission on every transaction, while other banks have monthly flat rates. 

  1. Tax planning:

We we decide that we want to start operating in a new market, it’s usually so because we already know that there’s a new source of income opening up. Due to the nature of these processes, the costs incurred by companies are centralized in the country where the company was founded (management payroll, platform development, etc.), whereas the costs in the new country are usually much lower than the income, which at times leads to a taxable basis that is larger than expected. This may affect the profits in one country and even tax losses in another; therefore, careful tax planning before the start of operations is fundamental to optimizing the company’s regional/global tax expenditures.

  1. Appoint a local person with sufficient powers to handle matters before the various local authorities and regulatory entities.

Depending on the size of your company, it is usually the case that you embark on an expansion process without employees in the new country and delegate administration to the parent company. However, it is essential that you have a person residing in the new country with sufficient powers to handle all the paperwork and procedures that may be required during the process. In several Latin American countries there is still a lot of red tape involved in procedures to be conducted before authorities. A local who address and respond to the authorities is therefore essential.

  1. If there is a chamber that brings together firms of your sector, become a member and do your best effort to be a part of its activities.

Our region is experiencing tremendous growth in the technological sector (e-commerce, FinTech, InsurTech firms, etc.). At the same time, because this generally involves new business models, the sector’s activities are not yet regulated and/or they are “unknown” to the regulatory authorities in each country. That is why being a member of the chambers that group together these types of companies (e.g. the FinTech Chamber, the Chamber of Electronic Commerce, etc.) offers the chance to be in the loop about any action regulatory entities may seek to carry out, and thus enables you to have a voice during the regulation drafting and implementation process. It will also help you be aware of the benefits your company may qualify for in a particular country (tax benefits, social security benefits, etc.).

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