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If you’re running a business, getting the best rates on your sales and purchases is always best, especially if you’re dealing with international suppliers. Most contemporary entrepreneurs operate in a progressive global setting. Hence, it’s not unusual to find them either shipping merchandise from overseas or batching jobs for international freelancers.
The capacity to safely and conveniently pay for global services and supplies is essential for businesses to grow. As a modern entrepreneur who’s had to pay an overseas supplier, you understand how expensive foreign exchange through conventional banking systems can be.
But as a small business owner, wired transfers may attract incoming and outgoing charges that could reduce profit margins. In this article, you’ll learn several methods of paying your international suppliers and how to save on fees or commissions involved in the transactions. Below are some of them:
1. Create A Local Bank Account
Nowadays, most bank transactions are conducted online; therefore, you can open an account in your supplier’s country. For example, if you regularly import goods from Canada and constantly pay bills in Canadian dollars, opening an online account with a Canadian bank may be wise.
After setting up the account, you can add funds and use them to pay your international suppliers as the need arises. It saves you from incurring foreign exchange costs anytime you make an international payment.
However, suppose the country’s regulations don’t allow you to set up an account. In that case, you can create a foreign business account with online service experts like Airwallex or similar ones, allowing you to open a multi-currency account.
2. Get A Forward Exchange Rate Contract
Exchange rates fluctuate depending on the prevailing economic condition of a particular country. If you’re unsure when you’ll pay your international supplier and fear that the rates will have risen by the time you’re ready, you can negotiate with your bank to freeze the rates. This process is called forward contracting.
The exchange rate determines the amount you get after converting a certain amount of money from one currency to another. In some cases, one bank may offer better rates than another, but it’s not guaranteed that the same bank will always provide reasonable rates. Therefore, it creates uncertainty for most entrepreneurs who import products from foreign countries.
Nevertheless, forward contracts protect you from the negative impact of exchange rate fluctuations that could occur before you pay for your merchandise. Signing such agreements can save you from incurring extra charges accrued from variations in exchange rates.
3. Use Bank Transfers
While bank transfers could be the most popular and trustworthy method for paying foreign contractors, you can also use them for cross-border payments. Making a bank transfer is one of the best ways to transfer large sums overseas.
It’s cheap and more secure compared to other methods. However, it can take longer compared to wire transfers. It’s also safe because you don’t need to disclose your details to your recipient. The only information required is the routing number and bank account details.
4. Pay With A Credit Card
A credit card is a fast and straightforward method for paying your international suppliers since you can use it for online transactions. In most cases, you won’t have to pay anything over the standard interest rates. And if you do, it’ll probably only be a modest amount.
Alternatively, you can use a debit card issued by your bank if you don’t want to pay in total upfront. However, it has risks since you can’t reverse a transaction once it’s done.
5. Use Fintech Money Transfer Methods
The advent of mobile phones made the world become a global village. You can now complete an international transaction in seconds at the comfort of your phone. Thanks to the fintech money transfer companies that have capitalized on banks’ flaws, you can now pay your suppliers at a minimal cost.
Fintech companies are constantly changing with technological advancements and are revolutionizing international money transfer systems. For example, using blockchain technology, fintech transfer systems ensure your transactions are fast, secure, transparent, and affordable.
Furthermore, they don’t charge additional fees such as cancellation, amendment, and other underlying fees, reducing the total cost. If you’re an international merchant, this payment method could be the solution you’ve always needed.
The conventional methods of international money transfer mostly favor well-established merchants. Using them may be expensive and reduce your profit margins if you’re a small-scale entrepreneur.
The best option is to use fast, safe, cost-effective means that favor your business. These methods include fintech money transfer, credit cards, and negotiating for better exchange rates. You can also open an account with a bank in the country where you transact most to reduce international transaction costs. Eventually, you’ll save and, more so, increase your profits.