In today’s increasingly small world, it is unavoidable for the modern business to conduct business abroad. Even the most resolutely regional of enterprises will at some point need to make an international transaction – a new normal in a world figuratively without borders. But as changing international law continually proves, those borders are very real; they’re very real, and the present a very real,
very costly challenge to businesses trying to send money abroad the right way.
Whether your business is a small one in the process of engaging an international supplier, or you’re a budding multinational conglomerate that wishes to seed new regional growth, you’ll want to know a little more about what makes international payments tick – and how to make them cheaper. In this guide, you’ll find three key ways to do exactly that.
1) Understanding Where International Payment Costs Come From
In order to understand how to make international payments cheaper, we first need to understand what makes them expensive. There are a few threads to pull here, the most obvious of which is that of exchange rates. Different currencies bear different value relationships to one another, and those relationships are constantly shifting over time. As such, one transaction can be less valuable than another.
On top of this, there is a lot of handling that has to happen before one currency can be converted to another – handling that costs money. This equates to transaction fees, as levied by banking institutions asked to make international payments outright. On top of all of this, the manual processing of such payments means paying someone in your business to handle them – and where operational inefficiencies are inevitable, so too are increased man-hour costs.
2) Improving Efficiency Through Better Processes
Working backwards, then, one of the key ways to improve costs associated with international payments is by attempting to improve the efficiency of making such payments. By streamlining financial operations, and by creating standardised processes with redundancy, a business can significantly reduce unnecessary costs as created by inefficiencies, errors and increased man-hour requirements. These savings, naturally, stack with every new transaction.
3) Using Smarter Approaches To International Transactions
Efficiency is one thing, but shrewdness is another entirely – and there may be simpler, smarter methods for moving money across markets more effectively. Cross border payments platforms are one such method, being that they are a cost-efficient payment strategy that bundles multiple processes into a single product. Such services also often enable the automation of certain financial processes, further improving the overall efficiency of sending money overseas.
4) Comparing International Payment Providers
Firms are not supposed to always use their established bank to make all foreign payments. The exchange rates, transfer fees and processing times can vary greatly among different providers. Before transferring money, it is possible to compare costs and find more affordable ways to conduct regular international transactions. The headline transfer fee is only the tip of the iceberg, and an unfavourable exchange-rate margin may make an otherwise cheap service all the more expensive. Issues like the speed of payment, currencies that it supports, security and customer service should also be considered by businesses. In the case of firms that commonly transfer cash abroad, very little change in the price of a single transaction can translate into significant savings in the long run.
Finally, but no less importantly, the transparent, cohesive and unabridged reporting of such overseas transactions is crucial for your business to identify additional areas for savings. By keeping all international transactions visible, it is possible to isolate cost inefficiencies as they relate to payment schedules or even the orders themselves.