The Economic Side of Distributed Enterprises

As we wrap up our detailed look into the specificities of distributed enterprises, let’s talk about the financial side of things and some details you have to pay attention to if you decide to operate under this model.
June 27, 2022
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This article is part of our Distributed Enterprises Series

This is it. After 11 installments during which we detailed several important, dare I say vital, aspects of distributed enterprises, we have reached the concluding chapter of this extensive series. 

After detailing the exact definition and clearing up some confusion as to what distributed enterprises actually are, we delved into the operational side of things, sharing our advice and expertise on how to set up a company under this model and what details you should pay attention to on its day-to-day operations. Now, as we wrap things up, let’s take a look at the financial side of things and which way better suits this particular model.

Before we begin, it’s important to highlight that, even though some of the topics I’m going to mention here are generally applicable to most, if not all, companies that choose to operate under a distributed model, there may be specificities to which you have to pay attention that will depend on in which country or region your company is actually registered.

It’s paramount to be aware of such geographical differences so as to not incur into serious mistakes that can have dire consequences in the mid to long term. Now that we got that out of the way, let’s dive into some of the economic issues surrounding distributed enterprises.

It’s All a Matter of Choice

As we have been saying recently, when it comes to adopting a distributed model, there’s no one size fits all approach that can be considered the right one. This is precisely why we shared The BairesDev Guide to Hybrid Work, highlighting the different strategies and possibilities offered by the distributed and hybrid models and showing that, at the end of the day, it all depends on what you believe would suit your enterprise best and help you achieve better business outcomes.

The same can be said when we think about the financial side of things. A distributed model comes with its own set of challenges and advantages that, while may be interesting to some, may also prove to be a burden to others. 

On a side note, one thing that may prove itself interesting is taking a look at our latest feature that explores how automation can provide valuable solutions to distributed enterprises. The day-to-day financial operations, including the more direct transactions such as salary payments, overtime and vacation calculations, and adding up expenses can easily be automated and give you much needed help.

When you operate as a traditional company, with clearly defined headquarters and subsidiaries, you are able to maintain all of your financial structure centralized and under your thumb. Not only that, but you will have the privilege of only abiding by the laws and regulations of the country in which you are based on. 

Evidently, in the case of multinational corporations, things become a bit trickier, with different companies existing under the umbrella of the headquarters. So even though you may encounter specific situations that demand special attention, this is more or less how things have always been structured by corporations everywhere.

And then comes the distributed model. Here you’ll find that there are a number of different ways to move forward, depending on how you chose to structure your business, what your short, mid, and long term plans are, and how distributed your teams actually are. 

As you can imagine, if you have employees or enlist contractors from the same country in which you’re headquartered, things will be different than if you employ talent from all across the globe and with no geographical boundaries.

Getting Down to Business

For the purpose of this conversation, let’s consider you’re setting up your company in a similar way to how we do things here at BairesDev. In our case, we are headquartered in San Francisco, USA, and work with talent and customers from all around the world. 

Following a similar strategy, you’ll find the need to retain HR and financial professionals in some of your most important markets. This will provide you with the expertise to deal with local idiosyncrasies and particular ways of doing things that can change from region to region. So even though it all starts at your headquarters, when the processes flow through the local departments they’ll be adapted to meet specific needs. 

Needless to say, this will help you ensure everything is being done by the book and have the advantage of presenting you with the talent from the expanded teams that take care of the financial transactions on your behalf. As it is with everything, however, there’s always a downside. You’ll have to manage different teams from different locations and look for the best providers, so it will be a bit more busy for your headquarters’ HR and administrative staff.

Talking about salary and compensation, it’s interesting to determine a currency for salaries and costs. Ideally, the currency from where you’re officially established will be the baseline of your staff’s salary and will free you up from worrying about fluctuating markets and exchange rates. If you set up interesting compensation packages, it will more than offset the eventual extra work some employees may have to receive it in their traditional bank accounts.

While we are on this subject, a downside of this is the need for specific information and training for your staff to understand how this process works and don’t make any mistakes. Most professionals may be used to working only for domestic companies, never having had the opportunity to render services to enterprises established abroad. That’s why it would be so important to advise and guide them through this process.

Finally, assembling distributed teams of independent contractors spread out across several regions will ultimately save you in expenses and taxes associated with your staff. Once again, this is an element that would ideally require you to offer more interesting compensation options to the talent you’re pursuing, but at the end of the day it will bring you more advantages than the alternative.

Before making any large business decisions and devising your strategy, remember to always assess your specific needs and analyze the current scenario, be it the one of your potential staff, be it the one where your clients are. Leverage the expertise of seasoned professionals to develop an ironclad structure and protect yourself from any pitfalls. The distributed model can bring you several benefits if you adopt it fully aware of all its particularities and go into it prepared for what you’re going to find.

More related articles on our Distributed Enterprises Series

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