International expansion can be an exciting time for your clients as they take advantage of new markets. If you can help them prepare for the critical moments within their organisation, it can open up the opportunity for continued work with a growing business.
As your clients succeed with your help, that reflects well on your accounting firm. You can establish yourself as an industry leader which delivers transformative results. But what are some of the best key performance indicators you can track for your clients to ready them for international expansion?
Key performance indicators can help businesses understand their current positions within their existing markets. That could mean that you encourage them to identify their strengths and areas that could need improvement.
There might be similarities with new customers in international markets, which means they can replicate successes. Alternatively, if they know the points where they struggle, it can form a more significant focus during expansion.
The arrival into a new market can require significant investment to advertise to new audiences and align the business to the regulations of a territory. Performance indicators must show that the company can grow to manage some of those additional costs.
Additionally, as an accountancy firm, you can use your client's KPIs to better understand their financial position, which is crucial as you make sure that they align with the new international accounting standards that they may need to follow.
International financial reporting standards are likely to vary between markets, so it's helpful for your firm to conduct preliminary research on behalf of your clients.
Aside from any international accounting standards, some key performance indicators can determine whether your client is ready for an expansion.
Gross Profit Margin
Your client's gross profit margin is their total revenue minus the cost of goods sold. If the margin is low, it could indicate that the business is unlikely to sustain the additional costs required to enter a new market. A high margin can suggest enough income to reinvest into the business and finance the international growth strategy.
A client's current assets minus their current liabilities can offer the figure of their working capital, which is a crucial KPI for expansion. If working capital is low or negative, that can indicate that the business is in poor financial health. It may be difficult to justify moving to another market with a struggling client in their current ones.
Return On Equity
Your client may need the support of their shareholders before they go forward with their plans to expand into an international market. It's helpful to look at the business's return on equity to help understand whether they are likely to be on-side. That can analyse the value your client generates for its owners.
In addition to straightforward financial key performance indicators, your firm can look at other areas of your client's business, such as its sales.
There may be international accounting standards that vary in different countries for sales taxes. But crucially, the current sales figures can be a great indicator of the potential success of the product or services introduction to new markets.
Sales Growth Rate
Monthly sales comparison within your client's business can signal a significant trajectory. It can also help to identify times of the year when sales increase or decrease. With those sorts of helpful information, it's possible to suggest the best schedules to launch within the new international markets.
Lead-to-Sale Conversion Rate
One significant component of your client's ability to thrive in a new market will be how they manage to convert leads into sales. With the KPI of lead-to-sale conversion rate, you can measure their effectiveness in making that happen. If the business struggles to convert leads, it could also fail to create sales during its expansion.
Customer Acquisition Cost
It can be helpful to understand the likely costs to your clients of generating customers to enter a new market. That's why a figure for customer acquisition cost can become an essential factor. It involves comparing the costs to get customers with how many there are in the same period, which can be helpful when the client moves into an area and seeks to build a customer base quickly.
Although different countries may have specific laws and regulations, a set of International Financial Reporting Standards to follow is likely to be consistent across regions, including within the European Union.
Those standards are from the International Accounting Standards Board (IASB), a London-based organisation. The purpose of the criteria is to ensure accounting practices are fair and transparent worldwide.
The International Financial Reporting Standards require companies to maintain their financial records whilst reporting expenses and income. Investors, auditors and regulators understand these principles globally.
There are four critical statements that companies must follow to comply:
- Statement of Financial Position — an up-to-date balance sheet which provides the relevant reporting information.
- Statement of Comprehensive Income — a profit and loss statement that makes the business's overall income transparent.
- Statement of Changes in Equity — a retained earnings statement that shows any change within profit over a financial period and clarifies it to stakeholders.
- Statement of Cash Flows — reports of companies' transactions over a financial period, highlighting cash flow.
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