While local trade may be the bread and butter of many small businesses, increasingly SMBs are operating in the global marketplace. Whilst this expanded reach is great for the bottom line, making international payments is often a headache for the small business owner… But it doesn’t have to be.
The most common international payment systems were originally set up for the use of large companies. Typically, these big businesses made large multiple transactions on a recurring basis. However, this model doesn’t really cater to the needs of small businesses who are seeking to pay foreign vendors. The traditional setup of transferring funds simply isn’t ideal and is oftentimes cost prohibitive. Especially when you consider the wire transfers alone often incur both incoming and outgoing charges, the real cost of the total transactions collectively add up very fast.
Mr Grossbard, a director from Compare Forex Brokers suggests it’s not all doom and gloom. With the introduction of alternative financial services to the traditional big four banks, trading in foreign currency need not cost you the earth.
“On the bright side, there are some alternatives which are more suitable for many businesses and foreign vendors’. Grossbard says.
Here’s Grossbard’s top tips for paying in foreign currency:
PayPal is widely used globally because it allows users to send money to anyone that has an email address. Once PayPal receives the funds, it gets deposited into the account holders PayPal account. PayPal earns interest from that until the recipient chooses to withdraw the money. Bear in mind, there are many countries that established laws which limit their citizens’ ability to transfer money from PayPal to a domestic bank account. In those cases, the vendor wouldn’t accept their payments over PayPal. PayPal also charges sellers a small fee for receiving funds, which is typically nearly three percent of the amount.
Skrill accounts support any of the major currencies, however once the first transaction is made, the currency of the Skrill account cannot be changed. Its users can purchase a branded prepaid card which is linked to their account in USD, EUR, PLN, and GBP. Skrill also offers premium membership which includes additional features including loyalty points, and multi-currency accounts.
OANDA is an award-winning leader in foreign currency-related services and information. They don’t charge account fees, nor do they have minimum balance requirements. Most OANDA transfers charge a flat fee of $25, and funds can be sent to 200 countries. It’s advised that like any service that offers foreign currency transfers, it is important to determine the exchange rate that is being offered and compare that to your current rate.
Non-Resident Alien Bank Account
Non-resident alien bank accounts are an option for foreign freelancers that are taking on projects from companies in the United States. This option is worth suggesting if your business is based in the US and you plan to work with a foreign vendor on a long-term basis and other solutions don’t seem to work. It is worth noting, however, that most foreign service providers that have US bank accounts also have a PayPal account. As mentioned earlier though, they may have limitations on funds that can be transferred out of PayPal.
American Express FX International Payments allows businesses to send foreign payments in US dollars or in foreign currency to over 110 countries worldwide. Once the account is setup, it will be linked to your company’s bank account to make payment deductions as needed. This service is great for both large and frequent transfers, as well as smaller infrequent transfers. There is no fee for incoming currency payments, no setup/maintenance fees, no transfer limits, and transfers are completed within four days. Customer service is also available 24-hours Monday-Friday.
Thanks to payment options such as these, globalisation is no longer limited to Fortune 500 companies. Businesses of any size can easily tap into foreign markets for services and make payments accordingly while eliminating risks and frustration. International wire transfers, though costly, do have their own set of perks, such as the immediate use of funds, and prevention of collection-related issues. For tax purposes, it requires proper documentation such as commercial invoices.
Regardless of which method is chosen to make international payments, it’s important to try to keep the process itself as simple as possible for both parties.
Interested in finding out more about forex? Visit CompareForexBrokers.com.au for more information