Here is Something to Think About…
Recently, I came across some interesting information while working with a client who has an MDF program that supports international partners. I wanted to share a few points of consideration that affect program ROI and complexity in accounting practices stemming from MDF and global incentive programs supporting international partners.
It’s important to understand how changes in the exchange rate can indirectly impact your organization’s profitability, partner satisfaction and ease of doing business. There are multiple ways that companies choose to manage payments to their international partners, and each method has its own implications.
For more consistency with accounting, some organizations choose to pay all domestic and international partners in U.S. dollars. This places the responsibility of managing currency conversion on the partner and is done through their own banks—usually resulting in a fee. While this method may be easier for accounting purposes, it does cause some inconsistency with the final value received by the partner once payments have been converted to local currency. This inconsistency in payment can ultimately impact partner satisfaction.
One option that enhances the partner experience is to offer international partners the option for incentives to be paid in their currency of choice at a static rate. While this option provides consistency to the partner, the volatility of currency exchange causes the organization to experience inconsistency in payout rates. This option also runs the risk of increased program costs. Plus, there is an added level of complexity in the accounting of fluctuating incentive payouts and tracking of multiple currencies.
Closing Thought on Your Global Incentive Programs
Incentive programs are designed to drive engagement with partners and resellers. While the goal is always to create compelling incentives and engaging MDF programs, there are not-so-obvious factors to consider that affect the profitability of such programs. It pays to look at various payout scenarios using current exchange rates, when creating or revisiting incentive and MDF programs.