By Dustin Walsh
Repost from: Crain's Detroit Business, Aug. 1st, 2010
Location: Troy, with employees in Los Angeles, San Jose, Calif., Phoenix, Pittsburgh, Boston, London, Hong Kong, Shanghai and Frankfurt, Germany.
Description: Global LT provides language services, cultural training and expatriate relocation to companies that operate globally. Its clients include Chrysler Group LLC and Prudential plc.
President: Hortensia Albertini
Founded: 1979
Employees: 45
Revenue: $9 million in 2009, with $8.7 million projected for 2010.
Problem to be solved: As the economy slowed and major automakers reduced the staff they moved from country to country, Global LT's services became less in demand. Its revenue slumped over 2008 and 2009.
And one of its largest international clients, Prudential — which represents about $2.5 million of Global LT's revenue — was exposed to currency fluctuations because Global LT's business was completely based on the U.S. dollar.
“If the dollar went up, the clients were upset; if it went down, our employees were upset,” said Kenneth Patterson, COO. “We were putting the risk on our clients and employees, and it became apparent that we could risk (losing) those relationships.”
Patterson said the company knew it had to begin operating in different currencies, but it didn't have the accounting staff capable of handling complex tax issues in several countries.
Solution: Global LT hired London-based UHY International Ltd., working through its Southfield office. UHY's service allows Global LT to bill clients and pay employees in local currencies and remain tax-compliant.
Once that was in place, Global LT began expanding its international operations, focusing on companies based near its international employees.
UHY assisted with creating an international subsidiary in London and is creating one in Asia.
The subsidiary also has allowed Global LT to generate new clients. The new business now represents 5 percent of revenue, and that's expected to grow, Patterson said.
Risks and considerations: The biggest risk for the expansion is that now the accounting is handled by a third-party.
“We want to remain compliant and we needed help to do so,” Patterson said. “However, now we're totally relying on an outside service, and if they make a mistake it will portray us in a poor image.”
But not hiring UHY could have led to the loss of one of their largest clients — a risk Patterson was not willing to take.
Expert opinion: Andy Dincolo, partner at Rehmann LLC's Farmington Hills office, said most companies are not equipped to handle international billing, payroll and tax compliance.
“Most contracts are written so they are payable in U.S. dollars,” he said. “If your client wants to shift the currency risk, you have to seek out assistance and have them run that program. It's unlikely that most companies have the in-house expertise to do that.”
Dincolo also recommends looking into a futures contract with a financial institution. It allows the company to pay a set exchange rate over a period of time, hedging the risk of currency fluctuations. However, this can be capital-intensive.
Dincolo said setting up an international subsidiary also will help streamline the international taxation process. However, a company should consult a firm specializing in this segment.
“There are a lot of responsibilities, and a specialized firm can help you avoid major penalties.”
Learn about Global LT's awards, achievements, and commitment.