A study conducted by Capital Economics for TransferWise, a leading overseas money transfer specialist, showed that small to mid-sized enterprises (SMEs) in the UK lose around 10 times more than big businesses when it comes to costs associated with cross-border payments. The study also revealed that SMEs in the UK were overcharged more than £4 billion in 2015 while making international payments.
This phenomenon does not limit to the UK alone, and SMEs from different countries still continue using their business bank accounts to make overseas money transfers. While banks are known to charge premiums when carrying out overseas money transfers, what might come as a surprise to SMEs is that they are typically offered less favorable rates when compared to big businesses. So, how do you go about finding a suitable service provider to meet your business’ international payments requirement?
Specialist money transfer companies are typically more cost effective when compared to banks, and they also tend to offer various foreign exchange strategies to suit your needs. Your options include:
- Spot transfers. This is way to go when you need to carry out a transfer as soon as possible. In this case, the prevailing exchange rate applies on your transfer.
- Forward contract. With a forward contract, you get the ability to lock in an existing rate to carry out a transfer at some point in the future. Some companies let you lock in exchange rates for up to two years. Forward contracts give you the ability to tide over negative movements in exchange rates.
- Limit order. A limit order may work well for your business if you are looking for a favorable exchange rate and are in no hurry to carry out your transfer. With a limit order, you get to set an exchange rate at which you want the transfer to take place. Once the rate reaches the desired level, the company you work with carries out your transfer automatically.
- Regular payments. Businesses with international footprints often need to make regular payments, to employees, distributors, or suppliers. A number of companies let businesses set up recurring payments. You may benefit by locking exchange rates in this scenario as well.
- Bulk payments. Some companies gives SMEs easy means to make bulk payments. All you need to do is upload all the required details online, and then make bulk payments through the click of a single button. Some companies provide tailor-made automated systems as well.
Foreign Currency Accounts
Some of the leading banks in the world offer foreign currency accounts, giving SMEs the ability to hold funds and transact in various currencies. Only, their exchange rates and fees tend to leave room for improvement. Now, some of the top money transfer companies such as TransferWise, OFX, and WorldFirst offer their business customers multicurrency accounts that they can use to hold funds as well as send and receive money.
Factors That Require Your Consideration
When selecting a company to carry out international business to business payments, pay attention to these aspects:
- Cost effectiveness. While fees affect the cost of your transfer, so does the exchange rate. Use online calculators provided by different companies to find out which one works best for you.
- Transfer options. These include spot transfers, forward contracts, limit orders, regular transfers, and bulk transfers.
- Turnaround time. This is particularly important if you want the money to get to the recipient quickly.
- Customer service. This aspect plays an important role because you might need assistance with your transfers at some point. While some of the top companies provide over the phone support, online support via chat and email is easier to find.
If you need to make an international business payment, know that you get several alternatives from which to choose. However, it is important that you compare your options well and look for a company according to your needs.