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How to manage international payments in your SME?

International trading is not reserved for large multinationals. If you’re a fast growing small or medium business, chances are you are sourcing products or services from foreign providers. But do you have a system in place to manage international payments smoothly and avoid additional costs?  Here are a few options you should consider in advance.

Are complex international banking systems and hefty fees what comes to mind when you think about paying an international invoice? It really does not have to be that way anymore. Making currency payments does not have to be confusing or expensive as long as you take a little time to plan and look for the solution that suits the needs of your business. Regular payments in foreign currencies can generate substantial costs and understanding the cost breakdown can sometimes take up time. But paying international invoices can be fuss free.

What’s the best way to pay an international invoice?

Did you receive an international invoice? Here’s what you need to consider. Is this invoice a recurring one? If so, you will most likely have to pay the same amount on top of it every time to make the transfer. How much will that be per year? What could you buy with that amount of money if you could save it up? Indeed, in an SME there are much better ways of spending money than transferring a large sum of money internationally. Even if you are already saving money by using a cheaper foreign supplier – you could be saving more.

Option 1: use your bank

First, check how much your bank charges you for international transfers to the country to which you want to make the transfer as well as to other countries you are likely to be doing business with in the future. Banks offer different types of international transfers such as SWIFT or SEPA. And within these systems you can choose different options that can speed up your transfer at an additional cost. In some cases (usually with more popular currencies) this can make it possible for the money to reach the receiver even on that same day. But this will often come at a substantial cost, which is yet another reason why it’s good to plan ahead when an international invoice deadline is approaching.

Different payments methods

You can also choose between different payment instructions (BEN, SHA, OUR) which allow you to choose who’s covering the cost of the transfer or split the fees between the payer and payee. So if your agreement with the business or person you’re purchasing from foresees such an arrangement, a traditional bank transfer could be a good option for you.

SWIFT

While SWIFT manages most international transfers (it offers a very broad spectrum of currency routes), it’s also a relatively expensive service. Banks can charge even up to £50 for this kind of transfer. If both you and the payee are based in the Euro zone, you can make a SEPA transfer, which will be significantly cheaper than using the SWIFT system. Banks which are SEPA members should not charge more than £2 for an international transfer in Euros. However, if a different currency than Euro is involved, even if it is one of the European currencies, you will not be able to use a SEPA transfer.

Bank offers

Check if your bank offers a certain number of international transfers for free – this could be possible for some currency routes. Do they match your needs? And last but not least, does your bank actually offer good exchange rates on the currencies involved? Use a reliable online comparison tool to check what other banks can offer. It could make sense to open another account to run your international transfers via a different domestic bank that offers lower fees. But if that still doesn’t cut your costs, it’s time to consider Option 2.

Option 2: use an international money operator

Using a dedicated online currency operator is becoming more and more popular among SMEs. Not only does it reduce the costs of making international payments but also provides more options when it comes to choosing the best exchange rate.

Fintech companies

With a variety of fintech companies offering international transfers, we can chose the ones that work best for a specific transaction at a given time. Either by giving us the best possible exchange rate or charging a very low transaction fee. If we’re trading in one of the most popular currencies such as dollars, pounds or euros, we can choose between a wide variety of providers to find the best offer before making the transfer. You don’t need to open a new bank account, nor do you necessarily need to commit to just one operator. The registration process is quick and you can choose more than one service provider depending on which one works best for each particular currency route.

International money operators

They offer most competitive prices for the more popular currency routes, but it’s also possible to manage your payments this way in the case of less popular currencies. Some operators such as WorldFirst can process payments in nearly 190 different currencies, so even if we’re making a payment in a less popular currency, it’s worth checking if we can make it through an online operator. But there are a number of reliable and well-regulated money operators you should consider, such as Transferwise, CurrencyFair or Azimo. With popular currency routes, where there are more providers to choose from, it’s always worth checking with a reliable comparison tool just before making the transfer.

Xchanger.io updates its search results in real time, which means you can get the best possible exchange rates at that particular moment.

Option 3: consider different payment methods every time

If the types of payments you make are less regular and it’s hard to predict what currencies you will be paying, it might be a better idea to look for the best payment option every time you make a transfer. Keeping your options open can mean you will save more money by always getting the best possible offer for the currency route and amount you’re transferring.

Remember to stay on top of your payments and use free tools to help you choose the best method every time.