What are the direct and indirect costs for staffing in the finance and administration area for a small subsidiary? At a minimum, a subsidiary needs to keep a set of financial records, provide social benefits to its employees, and submit statutory filings. This means hiring an accounting/administrative/payroll clerk or outsourcing the work. If the choice is to hire a clerk, then a tax accountant must also be retained to provide advice, review the monthly statements, and prepare the tax returns. In addition a lawyer needs to be retained to provide the statutory filings. In most cases the payroll is outsourced due to the complex processing required. Therefore, even with the internal staff, senior management will need to supervise the clerk and manage the work with the outside tax accountant, lawyer, and payroll company.
The accounting system and processes need careful consideration. Tax audits will be done in Japanese and require Japanese documentation. But, the home office needs to consolidate financial data, and therefore needs English financial statements. In addition, it is much more useful if the home office can drill down into the financial detail of their Japanese office—far easier to do in English than Japanese. Therefore, financial information must be available in both Japanese and English.
Of course, the home office will need to be able to ask questions, which means that both the accounting clerk and the tax accountant must be bilingual. One can argue that the home office could and should leave the details of their Japanese office alone, but doing so will inevitably limit the investment that the home office can make in Japan. The point is this: the degree of risk the home office can take will in very large part depend on the visibility they can get to monitor their investment.
In total, then, the hiring requirements call for a bilingual accounting clerk, a bilingual tax accountant, and a bilingual order processing and accounting system. And once a company begins to approach $10 million dollars in sales, it will also require a bilingual financial controller. So let's itemize the personnel costs:
Most companies find that they require a financial controller when their business is between 600 million to 1.2 billion yen per year ($5 to $10 million dollars). The controller is needed to produce budgets, budget variance reports, and cash-flow forecasts, and to work with the sales people on sales forecasts.
In a small company, a full-time accounting clerk and full-time controller are not required, but their expertise is required. This situation is exactly where outsourcing really works. The company gets a very high level of expertise, but only on an as-needed basis.
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