Multi-Disciplinary Management in China

January 19, 2021
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by Arie Schreier

Ever since I joined PTL Group in 2005, every time someone asks me “What does PTL Group do?”, I take a deep breath and think: “Where do I start?”

An elevator pitch, even the best-crafted one on the way to the top of Shanghai Tower, won’t begin scratching the surface of the variety of services PTL Group offers its clients.

As a lucrative market, China is abundant with service providers committed to helping ambitious international companies fulfill their potential in China. But confusion may arise because these companies, which offer more or less the same services, specialize in merely one business aspect. Companies that offer a wide variety of in-house services are hard to find.

We never liked to be called a “one-stop-shop” because we felt it sounded like a supermarket of services with no unique advantage. We prefer a different title. After 20 years of operation in China, PTL Group has developed its status as a multi-disciplinary service provider.

Unlike law, accounting or staffing firms that focus on a single area of expertise, we provide services regarding diverse business aspects and focus on their integration. We zoom-in to optimize HR, finance, logistics and manufacturing needs, and zoom-out to coordinate them seamlessly under one roof. We provide our clients with a dual approach that penetrates into each aspect of their business and at the same time, enable a birds’ eye-view of their China operation.

What does this mean in practice? Let’s take a closer look:

Payroll management is only one aspect of HR Management

How do you employ your team in China? You can use staffing or dispatch payroll companies, but they merely cater to a narrow aspect of a company’s HR needs.

HR management starts with verifying the candidate’s background to avoid future disappointments; Drafting a valid and legal labor contract that clearly states both parties’ terms according to specific needs and the relevant industry, and is formulated to prevent future crisis when termination is due.

Reliable HR management also supervises expenses and leaves, maintains direct contact with employees to ensure their welfare, handles crises (e.g. the coronavirus crisis), and liaises with HQ to bridge cultural gaps. PTL Group’s HR team is constantly involved in the employees’ daily routine. Since many of them actually work in our shared offices, we can observe their performance and work behavior on a daily basis.

Recruiters finish the job after the employee is hired. Payroll companies focus on salary and social benefits payments. Lawyers focus on drafting the employment agreement. PTL Group provides all of the above and continues to monitor employee needs, while protecting the interests of the overseas employer.

Bookkeeping is ONLY a single aspect of financial management

Some SMEs with a limited budget, especially in early stages, tend to hire a local accountant to prepare their financial reports for the local tax office. Nonetheless, when business activity grows, certain problems may arise.

Overseas CFOs are repeatedly confused when they receive data from their Chinese subsidiary and their local accountant. Apart from language obstacles, international and Chinese accounting standards often do not correspond, and financial reports often fail to describe the real happenings in China. For instance, recording sales under China GAAP is different than western GAAP. Also, a bookkeeping report will record financial activity but will not provide additional indications. For example, sales expenses will be recorded by the accountant based on invoices, but will not indicate whether they are exaggerated or unnecessary.

Comprehensive financial management should examine all business aspects, such as composing an accurate local price list; ERP system implementation (including implementation of an HQ-based ERP that can generate reports that are recognized in China); Accounts Payable and Accounts Receivable management; import and export planning; overseeing and negotiating customs and duty cost; VAT refunds; informing the HQ on financial activities and changes in tax rules; consultation on optimizing the taxation of the company, etc.

Freight forwarding and import agents are not enough for comprehensive logistics management

Many companies that export to China rely on their freight forwarder and local import agent to ensure that their goods are released from customs and arrive safely to their destination.

Local logistics management should act as the execution arm of the HQ’s logistics department. Its role is to handle all shipment processes from A to Z: preparing the shipment documents and required licenses; choosing the optimal port; confirming document validity; negotiating customs clearance costs; securing smooth customs release and local distribution.

The logistics department also communicates and collaborates with the financial department to assess expected costs (duties, VAT, inspections, licenses, transfer of funds, storage fees, etc.); ensure that the selling price covers costs and payments are made; ensure the transfer of funds through the State Authority of Foreign Exchange (SAFE); conduct currencies conversions; apply for VAT refunds, etc.

A comprehensive operational audit is NOT equal to an annual financial audit

When we discuss operational audits with 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. However, an operational audit is not confined solely to financial aspects.

The operational audit points out risky areas where further checks could be conducted such as HR efficiency and legality, relationships between staff members, logistics operation efficiency, manufacturing input vs. output, relationships with dealers, suppliers and clients, incomes vs. expenses habits, etc.

In extreme cases and based on the operational audit findings, PTL Group performs a complete turnaround and restructuring of the entire company.

Industrial incubator vs. OEM manufacturing

Many international companies would rather manufacture in China. However, setting up a factory in China is neither cheap nor easy.

Therefore, many companies are enticed by OEM manufacturers, which produce components or complete products according to the HQ’s instructions. But the risk here is obvious – copycatting and IP theft, which are some of the most serious concerns of international companies in China.

An industrial incubator is a great solution. With minimal effort, companies can set up an assembly or manufacturing line. 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, the control and IP remains in the hands of the company.

All in one and one for all

Managing a business in a different country is never simple, let alone in China. This is why foreign companies arriving in China should strive to make the unstable as stable as possible, by partnering with a multi-disciplinary service provider. 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. This is how we differentiate ourselves. Our wide services and packages offering can be tailored to each of our clients’ needs. Their success and peace of mind is our top priority.

So, the next time someone asks me “What does PTL Group do?”, I think my elevator pitch is ready.

For more information about our multi-disciplinary management service for foreign companies in China, contact us or PM me directly on LinkedIn.

Arie

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