Fund Distribution and Treasury Management – The Keys to Accurate Global Payroll Efficiency

Fund Distribution and Treasury Management - The Keys to Accurate Global Payroll Efficiency

Treasury Management includes a firm’s collections, disbursements, concentration, investment and funding activities. These activities include fund distribution to cover payroll. When a company starts running international payroll, the funding activities also include the trading of multiple currencies. The funding required for distribution to cover each country’s payroll must be in the currency of that country.

If international payroll is on your plate as the main course – or even a side dish – then the distribution of funds to cover that global payroll is the dessert, as it always comes at the end of the process and it makes your employees very satisfied! Fund distribution in the context of this article entails the sending of payroll funds to multiple countries to cover employee net payments, statutory authority obligations, and third party payments. And, it turns out, there are many ways to accomplish this; the funding ‘dessert menu’ has several options to choose from.

1. Single Currency Fund Distribution

The most popular option is also the simplest. You can provide funds in one single currency to cover the multiple payroll and compliance currencies you manage. In this scenario, your global payroll provider will convert to local currency and handle payments to employees, statutory agencies, and benefit providers. Since your provider is taking on this step, you should ensure that the provider takes full responsibility for the funding that passes through their treasury operations. For example, with Celergo Global Payroll LLC as your single funding source, you receive a guarantee that your funds will arrive on time and in the full amount specified.

Celergo’s in-house treasury team can make payments in over 96 different countries while ensuring strict compliance with Office of Foreign Asset Control (OFAC) regulations and other international requirements that affect global fund transfers. Celergo’s high volume of transfers allows for the negotiation of competitive rates, often better than those that can be obtained by individual clients alone. And, by locking in the exchange rate prior to funding, Celergo eliminates post-transaction foreign exchange reconciliation. Once quoted, the exchange rate will not vary which simplifies the general ledger reporting and reduces the burden on corporate finance systems.

2. Local to Local Currency Fund Distribution

There is also an option to fund your global payroll provider’s In Country Provider (ICP) locally. This option can make sense for the countries in which you already have a local bank presence. For example, it may be most efficient for your local Ireland bank to send the payroll funds covering your Ireland employee payments and Ireland statutory obligations to the local ICP in Ireland directly for dissemination. Companies generating revenue sufficient enough to cover the payroll and other expenses of their operations in the subject country usually prefer this option.

3. In-House Treasury Fund Distribution

Another option is to expand your own treasury management service in-house. In this scenario, your treasury team would purchase each of your required local currencies and handle the payments to employees, statutory agencies, and third parties directly. This is a good option if your company already has high quality, comprehensive treasury resources in-house or is committed to expanding these resources. Even in this scenario, Celergo is able to help clients by providing access to quality Foreign Exchange (FX) house that provides a cloud-based system through which the client’s treasury team can easily and efficiently handle their own transactions. The system allows the client to initiate, track, fund, and report on their own FX activity while providing access to great exchange rates.4. Custom Solution Fund Distribution

4. Custom Solution Fund Distribution

Finally, for your specific situation, it may make sense for you to employ a combination of the above options in a program that is custom tailored. Take, for example, a company that operates across a total of ten countries. They are generating enough revenue in 5 of these countries to cover payroll and expenses, but only have a small representative office in the other five and no additional resources within Finance to manage frequent FX transactions. This company would do well to fund their five revenue-producing countries locally (Option 2 above) while utilizing their provider’s Treasury Management Service (Option 1 above) for the remaining five countries with small offices. In this scenario, the provider should still be able to provide global roll-up reporting to the client showing their total spend in both the local and home currencies.

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In reality, a custom solution that incorporates a variety of these scenarios makes sense for most companies with a presence in three or more countries. Consider it a dessert tasting menu, if you will. The global payroll provider you choose should offer each these options to you.  Celergo Global Payroll LLC offers each of these fund distribution options and partners with its clients to help them make the most cost-effective custom solution decision. Bon Appetit!

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