Best Practices for International Business Payments by Jason Kumpf
The rapidly changing technological landscape has made the world a much smaller place. If your business wants to compete, you’re likely partnering or selling to entities outside the borders of your own country. It would seem like transferring money between countries should be simple. Everything is connected. Information moves through the internet instantaneously.
Funds are entirely different from information. If you’re doing business on a global scale, it’s important that you use best practices for securing payments to countries outside of your own.
Choosing a Bank or Separate Facilitator
A lot of businesses opt to go through their bank to make international wire transfers. If you’re working with very small amounts or you rarely do business overseas, that option might be worth the fees simply because it saves time. If you’re doing business on a wide scale in other countries, you should be aware that there are hidden and not so hidden fees attached.
There are reasons to choose to do business exclusively with your own bank. You’ve developed a relationship with the bank where you hold your corporate accounts and a relationship means trust. For the most part, though, international business is more expensive through international wire transfers. If you rarely need to make payments or accept funds from overseas, this cost may amount to less than the time it takes to build a relationship with a third party. If you’re planning on expanding your business to include a substantial percentage of yearly revenue or expenses in another country, it’s important that you do the research to understand your options.
Some companies, when working with vendors, will choose to do business with contract sites online. These sites that connect freelance talent with businesses, allow access to professional help in locations all over the world. The payments are taken through the site, making it a secure way to do business on a large or small scale. The site itself guarantees that the work will be furnished and your payment is secure. This option can be an excellent way to outsource help and saves you the hassle of understanding exchange rates in other countries.
Another option might be to use a credit union. Credit unions can offer better payment structures and lower fees for businesses doing a substantial volume of transfers in a wide variety of locations.
If your business is expanding to include regular payments to vendors in another country or you’re selling to a market in another country, it’s worth the time to research your best options in fund transfers. A third party option can be the best idea here because you can build a long-term relationship with the company. OFX, for instance, works with more than 50 currencies and offers excellent exchange rates. Depending on your business model, using a platform such as OFX can help you not only monitor and save on your own transactions, but pass the customer service and savings on to your customers and employees as an add on service for your business.
Paying in US Currency vs. Foreign Currency
When you’re dealing with international business, don’t be fooled into thinking that the US dollar is the most coveted payment method. The truth is that accepting payment in a foreign currency isn’t ideal for your vendors. They need it in their own currency, and they’ll often pass that cost back to you.
International wire transfers take more time than domestic wire transfers. Often you’ll have to wait as long as five days for a financial institution to verify the funds. Speeding that process can be exceptionally pricey. Some traditional financial institutions charge an exorbitant rate for same day transfers for international funds — it can be as high as 10%. If you can’t wait the standard amount of time for transfers, or if you’re doing a high level of business overseas, same day transfer fees should be an area that you research. Some newer digital partners can offer a far better rate than your bank.
The exchange rate itself is another area where your company may experience hidden fees. It’s important that you stay current on the exchange rate for currencies in countries where you’re doing business. Double check that exchange rate with the institutions that you use. Some less scrupulous providers may be adding fees into the exchange rate.
It’s ideal that you pay in the currency for the location because you have greater control over the amount of payment, negotiations of payment, and transparency of cost. If you’re counting on the vendor to take payment in your own currency, you have little control over the cost of the exchange rate.
OFX Payment Platform for Global Leaders
Jason Kumpf, the Director at OFX, has made saving your business revenue in the global economy the premise of his business. OFX is constantly expanding and currently includes 55 separate currencies. The model here offers a great benefit for any type of business.
With the global way that people do business today, it’s not just the large corporations who need access to reliable exchange rates and guaranteed transactions abroad. OFX offers business solutions for small businesses, medium-sized businesses, those with a large membership base, and those engaged in eCommerce.
OFX has developed a secure, online platform. For individual account holders, this mean instant access to a wide array of financial institutions throughout the world. This network allows you to more easily transfer funds from one currency to another, saving money and time. The platform was designed with user experience in mind. There is twenty-four hour, seven day a week access to help, if you have questions about an exchange rate or are concerned over a transfer. The dashboard is designed so that the process is as straightforward as possible, making a complex business procedure far easier to assess in an instant.
For eCommerce customers, OFX’s platform brings an excellent benefit to match the coveted efficiency and flexibility that online markets were founded on. These businesses have the benefit of a local account with a global reach. OFX streamlines the process of doing business around the world so that you can have access to your funds in the shortest amount of time with the lowest exchange rate possible. Not only that, but the OFX platform is compatible with the most widely used marketplaces, such as Amazon and eBay.
Because OFX partners with such a wide array of financial institutions, their customers have access to competitive rates and far more flexibility in their international business processes. Whether you need to pay freelance or permanent staff, pay vendors, or protect your company from volatile disruptions in the market that impact the exchange rate, OFX offers solutions.
By Jason Kumpf
Director of Strategic Partners