The Internet has facilitated how we can work together as a global business environment. It has offered the freelancers, entrepreneurs, and small business owners with a world of opportunity to expand their customer base.
Technology like content management systems, instant messaging, video conferencing and more make it easy to get customers and clients throughout the world.
One part of the freedom in that equation to work and go global is that it really creates a challenge in your payments system. The act of getting paid, or paying someone else for services may require that you figure out how to receive a payment in a foreign currency and then exchange that currency for your own.
There are now a number of options for collecting payments from overseas clients, so it’s just come down to figuring out which global payment option is the best choice for your business.
Here are some of the global payment options and how to determine which one works for your needs to ensure you can make the most of this world of opportunity:
Wire Transfer
Wire transfers have been one of the longest in-use ways to accept international payments. You simply have to have some type of bank account and be able to share certain details between you and your overseas client.
In the past, this payment option could still take many business days, but new wire transfer services have taken out the middleman (aka, financial institutions) and have provided a way to speed funds transfer (think less than 24 hours) plus the ability to remove the excessive fees that are often charged by banks for the use of international wire transfer services.
With the ability of new wire transfer services to let you conduct these transactions online and even use a credit card to do so, this could be your best option.
If you are expecting to receive larger sums of money and want to forego having to go through the cost of currency exchange, as this lets you just get the funds in your local currency. This also removes the concern over getting the best exchange rate because this service for international payments tends to be very competitive compared to a bank’s service for international wire transfers.
Consider this option if the payments tend to be larger or you are looking to do bulk payments.
Online Payment Gateway
While some online payment gateways may charge more in fees than online wire transfer service or bank, you can do research and find those online payment services that provide a low rate for the convenience of using their international gateway.
The positives associated with online payment gateways is that they are transparent, easy to use, has the ability to efficiently handle all currency exchange for you and provides quick access to your funds. Because of the percentage-based fees and other transactional costs involved, this international payment option tends to be a best way to receive payments from international clients when it involves smaller payments.
Factors that Determine Best Approach for Global Payments
It’s important to focus on specific factors that are important to your company’s cash flow and your budget because this can shape what type of global payment option is the best way for you to receive money.
Think about the current and future amount of your international invoices so that you can determine how this impacts on the fees that you must pay to conduct international transactions.
As your volume goes up, it’s good to find an international payments partner that doesn’t take an increasingly larger chunk of that revenue because it will eat into the profits that you should be getting for such expansion. In this way, a fleet fee arrangement may be the best approach to take.
Also consider what these international payments companies give you in terms of the exchange rate. Of course, you want the type of exchange rate that delivers the most money for the effort of working with these international customers.
Regularly review your international payment services options as rates may change and you no longer have the best way for global payments as you once had.
It’s important to also consider negotiating directly with your international payments partner to see if they will maintain the rates you had or agree to a better deal. It never hurts to ask because all they can do is say, no, or, better yet, respond with a yes.
Re-evaluating Your International Pricing Strategy
The numbers involved may also point to your own pricing strategy in which you reconfigure your pricing so that you are not throwing money away when expanding into other countries.
Watch so you will know if you need to raise your rates to compensate for the fees and exchange rate to ensure you still meet your own financial requirements for profitability.
What is the Best Way to Receive Payments in a Foreign Currency or Collect Payments from Overseas Clients? was originally posted on Transfermate by John Rampton.