5 top international payment tips for businesses

Posted on the 4th April 2016 by Alex Garbutt in SME blog

Each year, hundreds of entrepreneurial and growing companies consider international expansion. As part of this process foreign exchange and international payments will become standard business practice.

While the international expansion offers huge potential for growth, it’s not without risk.  Foreign exchange markets are unpredictable and volatile so it’s essential risk is controlled.

To help eradicate the various challenges associated with foreign exchange and international trade I’ve created the top five tips to help you maximise your success:

1.Your bank isn’t the only provider of foreign exchange services

Using the same online banking platform for all your business activity is undoubtedly convenient, but it’s not transparent, and unlikely to be the cheapest option.

When making international payments through your online banking platform you may only see the transfer rates you’re going to get once you commit to the payment or transfer, and it’s not unusual to be charged large, hidden fees up to 4% of the transaction amount. A small investment of time in registering for an international payments specialist will be quickly repaid in monetary savings and improvements in your process.

2. Open multiple foreign currency accounts

If you operate internationally, and frequently receive, or make, payments in foreign currencies, it’s well worth setting up currency accounts with your bank. Although it can be a complicated process, it has multiple advantages. Firstly, you take control over how and when you make your exchanges, rather than letting your bank convert funds upon receipt. Secondly, as the cheapest way of converting currencies is not to convert currencies, holding foreign currency accounts means you can hold balances that you can use to pay out in the future.

3. Resist the temptation to speculate

It’s a bad habit to hoard currencies in the hope that the exchange rates will move in your favour, especially at the risk of disturbing your cash flow. It’s good practice to convert currencies as and when you need to (and this in itself is actually a method of hedging).

4. Consider using a variety of currency products

There are a multitude of currency products available to businesses through foreign exchange providers. A lot of which will be unnecessary unless you’re the biggest of multinationals, but there are a few to be aware of that could be useful. Currency forwards, for example, allow you to lock in an exchange rate if you have known outgoing payments or are receiving funds. This increases accounting certainty and reduces your exposure to exchange rate volatility. There’s nothing worse than issuing an invoice in Euros when the rate is 1.15 to the pound, only to be paid when the rate is 1.40 – which represents a loss of over 20%. Providers that can offer same day payments are always worth being aware of, and can come in handy when you’ve left an invoice payment to the last minute.

5. Select a payments provider that makes your life easier

Once you’ve made the decision to use a third party foreign exchange provider, make sure that it offers you the best tools and services. A lot of the brokers get into a battle over exchange rates and their service can often neglect supporting features and a good user experience.

Also consider the following:

• Are the fees and rates transparent? Beware of services that entice you with teaser rates.
• Does the service provide a payment-tracking feature? This is especially useful for businesses who use foreign exchange to pay third parties.
• Can your accountant log into it? Being that your foreign exchange is separate from the rest of your financials, it’s important that you have features that help consolidate the two, whether by your accountant or other member of your team.

Currency exchange and global payments should be an asset for enabling growth for your business, not an inhibitor. Any business operating internationally should explore the benefits that an independent foreign currency provider can bring, in both saving money and improving internal efficiencies.

Other articles you might be interested in

• 5 things to consider when choosing a business bank account
• Andy Homer interviews Money Mover CEO Hamish Anderson
• CMA report response and analysis

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