Being involved in the ever-expanding world of e-commerce nowadays requires business owners to process international payment transfers frequently. To accept payments for your products or services or to send money to USA, China, or other internationally-based vendors, entrepreneurs must first familiarise themselves with specific protocols and services which facilitate and track global funds transfers.
While it may seem daunting and confusing initially, learning about the various options for paying and receiving payments from international business partners can help you prepare for future business growth with minimal fuss. Once you have the right systems in place, your day-to-day business operations will run smoother, and you will better control your finances. Most importantly, you can position yourself to maintain good relationships with the freelancers, suppliers, and international vendors you work with.
Continue reading below to learn more about the options available to you and other things you must consider when making international business payments.
Set A Baseline Currency For International Payments
The parties involved in the transaction or ongoing business relationship must establish agreements on the baseline currency for transactions. For example, certain suppliers or vendors may prefer to do business in their native currency. At the same time, however, it’s becoming increasingly commonplace for international businesses to bill in US dollars to ensure uniformity across their invoices. If billing in USD is not sustainable for your business, however, a compromise could be met, either with the help of your accounts team or perhaps even a third-party financial consultant.
Typically, negotiating on invoicing processes will likely depend on the frequency with which you work together. For infrequent or one-time transactions, the baseline currency choice may be inconsequential. But for longer-term relationships, establishing a mutually agreed upon currency for international transactions is wise since many outside factors affect the interaction; things like fees, approvals, current exchange rates, and the time to complete funds transfer all come into play.
Establish Bank Wire Transfer Processes
Most credit unions and banks offer the option to organize bank wire transfers between individual and business organizational bank accounts, even across international borders. Wire transfers are one of the safest funds transfer methods, assuming the banks involved are long-established institutions. These secure transactions are made possible due to an international standard, the Society for Worldwide Interbank Financial Transactions, known as SWIFT.
Banks charge by the transaction, with costs usually around $50 for an outgoing international wire transfer, although these fees are subject to change. Be aware that banks hit you on both ends of this exchange as well; incoming transfers typically cost a minimum of $15 to $25 to receive per exchange. Discounts on wire transfers may be available if you maintain a long-standing relationship with the bank(s) or have a large deposit balance in your account with that particular institution. Some organizations may even negotiate with you or match their competitors’ rates. For this reason, it’s certainly worthwhile shopping around for rates and terms.
A wire transfer process is also pretty simple to initiate. First, you’ll need to acquire the pertinent details of the supplier or freelancer you wish to pay – items such as their name, tax identifier, addresses, and International Bank Account Number (IBAN). Once requested, the transfer process typically takes 2 to 5 business days. You may order this transfer service online using your bank’s website or in person during regular business hours.
Use PayPal And Other Payment Solutions
Several online payment solutions are currently on the market, the most well-known being PayPal. These services facilitate funds transfer between individuals and businesses and charge various fees for these services. Of course, how much you’ll end up paying per transaction depends on the nature of your account, plus the size and frequency of those payments.
Like banks, these services use end-to-end encryption and other industry-standard safety protocols, such as two-factor authentication, so that you can expect the same safety and transparency as you would expect from your local bank. Merchants using PayPal and competing payment solutions are also subject to fees related to international payments and currency conversion services, just as they would when making bank payments.
Other popular payment solutions on the market include Wise, Stripe, Venmo, and QuickBooks Online Mobile. It’s worth doing a little comparison research to evaluate the pros and cons further and compare fees for each service offered.
Use Payment Features Available On Freelancer Job Platforms
Finally, if you’re working with freelancers you’ve found on a freelancer job platform online, chances are you may be able to pay them right through this platform itself. Many freelancer marketplace platforms offer payment solutions for contractors to get paid by those who hire them for their projects.
If you choose to hire freelancers from Upwork, Fiverr, Hubstaff, SolidGigs, or other similarly established platforms, then you can use the in-house payment solutions offered by these services. Typically, you’ll be able to find payment features that accept Visa or MasterCard payments, as well as PayPal and other payment services. And once again, it’s always wise to compare the fees associated with each platform to ensure you’re making the right call for your business.
Stay On Top Of Your Outgoing International Payments Moving Forward
Staying on top of your international payment processes requires business owners to be in the loop with current global affairs. Keep your eye on currency exchange rates for your country and the other national currencies you’re likely to trade in.
It’s also a good rule of thumb to reassess the rates and terms with your business bank(s) and any other financial services you use to assist with processing international payments. In doing so, you’ll increase your chances of maintaining the best possible arrangement for your business, your operational budget, and your company’s other unique supply, distribution, and outsourcing needs.