Considering that instability inherently exists in doing business in China – be it constant regulation changes, localization requirements, or a centralized planned economy – then the Covid-19 outbreak only complicates the difficulties already part of operating in China. Given this business reality, it seems that outsourcing business services in China is the most responsible way of doing business in China when you can’t physically be in China. In fact, this is the ultimate solution for small and medium companies who want to sustain their China operation with minimum disruption to the business’s routine.
But, service providers in China are innumerable. How would you know which one to choose? At PTL Group we believe in a multi-disciplinary management approach, which responds to each aspect of our client’s business activities and, at the same time, provides a comprehensive support framework that they can rely on in their day-to-day business operations.
What makes a management company like us unique in the landscape of service providers in China? What is the added-value of a multi-disciplinary service provider, and what does it look like in practice? Here are the details:
Building a sales team in China: Employee recruitment in China is only the first step
Recruitment and hiring new employees are usually two of the first tasks international companies tackle when entering the Chinese market as well as building their local sales team. Many companies opt to use staffing agencies or local providers of payroll services in China, but they merely cater to a narrow aspect of a company’s HR needs. How do we know? Because eventually, the vast majority of such companies come to us to fill in the gaps.
It’s critical to understand, that building a committed China team requires help with verifying candidates’ background for each position, drafting valid labor contracts that serve your needs, supervising employees’ expenses and annual leave, maintaining direct contact with them during lockdowns or holidays, and, when needed, crises handling and liaising between your local employees and the HQ. This overarching managerial approach is precisely what we promote with our local HR management services, which are not limited to merely recruitment or Chinese payroll. Instead, our HR specialists provide an all-encompassing support package that follows the entire employee life-cycle and are well versed in China’s strict and often-changing labor laws.
Recruiters finish the job after the employee is hired. Payroll companies focus on salary and social benefits payments. Lawyers focus on drafting labor contracts in China. We at PTL Group provide all of the above and continue to monitor employee needs, while protecting the interests of the overseas employer.
Financial management of the China operation: More than just accounting in China
Once starting a business in China, many SMEs tend to hire a local accountant to prepare their financial reports for the local tax office. Nonetheless, even if written flawlessly, the reports often don’t meet the HQ needs.
Overseas CFOs are repeatedly confused when they receive data from their Chinese subsidiary. Apart from language obstacles and the gaps between accounting in China and the respective international accounting standards, the financial reports often fail to describe the real happenings of the local operation. For instance, a sales expenses report is based on tax invoices in China, but it won’t indicate excessive or unnecessary expenses. But, if the company had an expert financial management function in China, it would also provide strategic planning and hands-on financial activity supervision.
Comprehensive financial management in China examines ALL business aspects. In addition to bookkeeping, the service includes budget planning, consistent updates in the company’s ERP system, overseeing and negotiating customs and duty costs, expenses vs. incomes management, VAT refunds in China, upgrading the company’s tax level in China, and periodical reporting to the HQ about financial activities and changes in tax rules.
Supply chain & logistical management in China: More than just freight forwarding
Many international companies that export to China rely on freight forwarders and local import agents to ensure that their goods are released from customs and arrive safely to their destination. That said, our experience has taught us that in order to maintain a smooth and profitable operation in China, as well as in competitive industries and in times of crisis, it’s recommended to utilize a local service provider that administers the supply chain management and provides logistics services in China. Through this offering our clients enjoy the benefits of having a direct executional arm in China, which works closely with the parent company’s financial and logistics departments.
The local logistics team manages the receipt and distribution of goods in China, including preparing the shipping documents and required licenses, choosing the optimal port, confirming document validity, negotiating customs clearance costs, and securing smooth customs release and local distribution.
The main advantage of utilizing a service provider like us, is that the logistics and financial departments in China work in close cooperation. This synergy facilitates the assessment of expected costs (duties, VAT, inspections, licenses, transfer of funds, storage fees, etc.); and ensures smooth transfer of funds, currencies conversions, applications for VAT refunds, etc. This is just what multi-disciplinary management means, and in practice, it’s worth money.
An operational audit in China: Much more than an annual financial audit
When we discuss operational audits with foreign managers in China, they proudly present the annual audit that was conducted by their local accounting firm and was approved by the tax office. Let’s distinguish between the two. The annual audit documents the financial activities as reported to the local tax office by the local team in a given year. But, an operational audit in China is not confined solely to financial aspects or reported activities.
An Operational Audit is yet another shining example of the benefits present in the multi-disciplinary approach. It is a comprehensive “health check” that inspects every company department to expose issues embedded into common practice. It then suggests tools to enhance the synchronization between departments and between the company to third parties, aimed at improving performance.
Manufacturing & assembly in China: Industrial incubator vs. OEM manufacturing
Many international companies would rather manufacture in China. In the preliminary stages, when setting up a factory in China is not justified yet, these companies work with local OEM manufacturers, which produce components or complete products according to the HQ’s instructions. Despite being a convenient solution, it also entails risks of violating copyrights.
Developing a production or assembly line in an industrial incubator eliminates these concerns. In the incubator area, international companies can establish their own production and assembly lines with minimal effort. They can employ a dedicated team to assemble products and get assistance from the incubator’s operational and managerial infrastructures. In addition to saving time and money, manufacturing in the incubator also reduces risks.
Integrated business management in China
Managing a business in a different country is never simple, let alone when it comes to doing business in China. This is why foreign companies arriving in China should strive to make the unstable as stable as possible, by partnering with local and professional ally providing multi-disciplinary comprehensive support. This partner must be able to orchestrate numerous business operation aspects and harmonize all business services.
This is exactly what we do at PTL Group, and this is how we differentiate ourselves from other, more narrowly focused providers. Our wide range of services and packages can be tailored to each of our clients’ needs. Their success and peace of mind are our top priority.