In today’s global economy, small-to-medium sized companies increasingly source goods and services from international suppliers. Without the negotiating leverage of larger companies, paying international suppliers in a timely and cost efficient manner can be challenging.
One of the fundamental problems is that firms often make critical mistakes in managing international invoices, which create unnecessary administrative bur-dens and erode bottom line profits. Some of the common mistakes made by businesses include:
- Using international drafts (i.e., checks). Physical payments can be lost or stolen in transit. They can also take a long time to reach their destination and, once there, often take even longer to “clear” into the recipient’s account.
- Transmitting funds incorrectly. Smaller companies frequently use incomplete or incorrect information when transmitting payments electronically. These types of errors usually result in payment delays, not to mention time-consuming investigations.
- Ignoring rates of exchange. Not understanding or ignoring exchange rates can dramatically cut into company profits. Many companies focus on transaction fees and forget that the real cost associated with international payments are noncompetitive rates of exchange.
- Using the wrong financial institution. Sending international payments through the same financial institution that processes domestic payments, regardless of its capability or cost effectiveness.
Thankfully, there are a few fundamental things businesses should do to improve the processing of their international invoices. Follow these steps to expedite delivery of your company’s international payments and saving your firm money in the process:
- Education: Discuss the foreign currency markets and communicate the timing, amount, and currency of your pending payments with your foreign currency payment provider. A currency specialist will help you navigate the volatile currency markets and, optimally, time the foreign exchange conversion for your specific transaction. In addition you should also discuss various international payment products, such as forward contracts or foreign currency holding accounts, which can help take advantage of favorable movements in the currency markets.
- Separation: Understand that a foreign currency conversion payment is entirely different from a domestic payment. The level of service, system capability, and knowledge required to efficiently and cost effectively execute international transactions is exponentially more complicated than domestic payments. Critically review your current domestic and international payment arrangements in order to streamline payment processing and reduce costs.
- Electronic Automation: Commit to processing all international invoices through wire transfers, also known as electronic funds transfer (EFT). This method of payment will get the money to your overseas supplier in the most secure and expeditious manner possible. You’ll need to gather all of the international account details from your overseas supplier such as the IBAN (needed in Europe), and bank SWIFT.
Tempus, Inc. is a world leader in foreign exchange and international payment services. Its expertise adds unique value through a combination of convenient service, market insight, and strategic currency products. Tempus and its global affiliates leverage a combined annual Foreign Exchange (FX) volume of over $150 billion to deliver sharper rates of exchange directly to their clients thereby reducing their exposure to volatile currency fluctuations. The company serves all organizations that require FX including manufacturing and industries involved in import-export and other international commerce. In addition, Tempus meets the FX needs of service industries including tour operators, freight forwarders, attorneys, and associations. Other sectors include equipment, construction, food, wine and liquor, textile and apparel, medical supplies, furniture, sports gear, and musical instrument. Tempus also serves industries that import raw materials and parts such as chemicals, aviation, automotive, and electronics.
Tempus contact: Phyllis Riley, Director, Business Development
Phone: 844-786-8339; E-mail: firstname.lastname@example.org
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