Managing Foreign Payments as an International Business

International business payments occur when businesses send or receive money across borders. Also known as cross-border payments and cross border transactions for this very reason, these transactions may involve making business payments to suppliers abroad or paying employees that live overseas.

There are many different methods of completing international business payments, which should be selected depending on your required time frame, the sums of money transferred, and the funds’ destination regions.

International money transfer companies and foreign exchange specialists like NewbridgeFX have made it simpler and more accessible to manage foreign payments as an international business. In this guide, we will explain the definition of an international business payment, the circumstances under which you would need to make these payments, and the process, time frames, and fees involved.

What are international business payments?

An international business payment is a sum of money sent to a foreign country for business-related purposes.

When making an international business payment, it’s important to manage and mitigate currency risk to protect your business against currency fluctuations and foreign exchange volatility. At NewbridgeFX, we offer three key risk management solutions for overseas business payments:

Forward contracts enable you to lock in a currency rate today to complete the transaction at a specific date within 12 months. This safeguards your business against currency rate fluctuations and enables you to book future payments in advance.

Spot contracts allow you to make immediate transfers at the current exchange rate. This means your business can make the transfer without setting any exchange rate targets that may not be met.

Market orders allow you to target specific exchange rates which aren’t currently available. Limit orders can be used to nominate a target exchange rate, and stop loss orders can be used to nominate a minimum exchange rate.

Managing foreign currency payments is crucial to stabilize international transactions and mitigate the impact of exchange rate volatility.

When do businesses need to make international payments?

International business payments are required when funds need to be sent to individuals or organisations who have provided goods or services in exchange for remuneration.

Paying overseas suppliers is crucial for maintaining global commerce and relationships, but it comes with challenges such as currency conversion and regulatory compliance.

Payments can be made through banks or through specialist foreign exchange providers such as NewbridgeFX. The latter is best suited to businesses that make international transfers as they provide better exchanges and personalised services.

What do you need to make a foreign currency payment?

You may need the following information to make an international payment as a business entity:

  • The receiver’s bank account name
  • The receiver’s account number or IBAN number
  • The receiver’s bank BIC or SWIFT code, bank address, or local routing code.

These requirements may vary according to the country to which you are sending funds. If you’re seeking further support on the requirements for making an international business payment, NewbridgeFX can provide clear guidance and instructions.

Managing Foreign Currency

Managing foreign currency is a crucial aspect of international business, as it can significantly impact a company’s bottom line. Understanding the fundamentals of currency exchange, recognizing foreign currency transactions, and navigating exchange rates are essential skills for businesses that operate globally.

Fundamentals of Currency Exchange

Currency exchange is the process of converting one currency into another. It is a critical component of international trade, enabling businesses to buy and sell goods and services across borders. The exchange rate, which is the price of one currency in terms of another, fluctuates constantly due to market forces such as supply and demand, economic indicators, and geopolitical events. By understanding these fundamentals, businesses can better anticipate and respond to changes in exchange rates, thereby minimizing potential losses and maximizing profits.

Recognizing Foreign Currency Transactions

Foreign currency transactions occur when a business buys or sells goods and services in a currency other than its domestic currency. These transactions can be complex, as they involve converting one currency into another. Accurate recording of these transactions in financial statements is crucial, as it ensures compliance with accounting standards and provides a clear picture of the company’s financial health. Businesses must take into account the exchange rate at the time of the transaction, as this can significantly impact the value of the transaction and, consequently, the company’s financial performance.

Navigating Exchange Rates

Exchange rates can be volatile, and businesses must navigate them carefully to avoid losses. There are several types of exchange rates that businesses need to be aware of:

  • Spot Rates: The current market rate at which a currency can be bought or sold for immediate delivery.
  • Forward Rates: The agreed-upon rate for a currency exchange that will occur at a future date, helping businesses hedge against potential fluctuations.
  • Option Rates: These give businesses the right, but not the obligation, to buy or sell a currency at a specified rate within a certain period.

By understanding and utilizing these different types of exchange rates, businesses can better manage their foreign currency risks and make more informed decisions regarding their international transactions.

International Payment Challenges

International payments can be complex and challenging, especially when it comes to payment speed and certainty.

Payment speed and certainty

Payment speed and certainty are critical components of international payments. Businesses need to ensure that their payments are processed quickly and efficiently, while also ensuring that they are secure and compliant with regulatory requirements. Delays or errors in payment processing can result in significant losses, damage to reputation, and strained relationships with suppliers and customers.

To address these challenges, businesses can use various payment methods, such as wire transfers, online payment platforms, and foreign exchange brokers. They can also use payment systems, such as SWIFT and SEPA, which provide a secure and efficient way to process international payments.

In addition, businesses can use various tools and technologies, such as payment tracking and monitoring systems, to ensure that their payments are processed quickly and efficiently. They can also use data analytics and machine learning algorithms to identify potential payment risks and take proactive measures to mitigate them.

By understanding the fundamentals of currency exchange, recognizing foreign currency transactions, and navigating exchange rates, businesses can better manage their foreign currency risks and ensure that their international payments are processed quickly and efficiently.

How long do international business payments take?

There are many factors that can affect how long international business payments take to reflect in a foreign bank account. These factors can include the time of day at which the payment was made, the country it is being sent to, and the day of the week. The date, local public holidays, the method of transaction used, and the specific verification checks imposed by the banks involved also contribute to processing times.

Knowing how long your payment will take to process will help to ensure that you comply with invoice due dates and avoid incurring penalties. International payments can take hours or days to be processed, depending on the combination of factors mentioned above. Payments can be processed on the same day for your convenience, and with NewbridgeFX, international payments are exceptionally quick, easy, and secure.

How much does it cost to make an international business payment with currency conversion fees?

The cost of making international business payments can vary considerably, and many businesses fall prey to excessive fees, including currency conversion fees. High street banks usually charge variable rates, and many charge their customers high fees to process international payments. Therefore, it’s important to be aware of exchange rates and market fluctuations to avoid experiencing large losses when making foreign payments.

Transaction fees can significantly erode profit margins, making it crucial for businesses to scrutinize these costs and seek strategies to mitigate them.

NewbridgeFX simplifies the process of making international business payments by charging no fees. We also offer the best exchange rates to our customers, helping to protect your profits while providing access to world-class services and expert advice.

Make cross border payments with NewbridgeFX

Optimise your organisation’s profits when making regular international payments by remaining aware of the exchange market and your target country’s requirements. To ensure the best results with minimal processing time and no fees involved, working with a trusted foreign exchange provider like NewbridgeFX is highly recommended.

Register your business and access benefits like multi-currency accounts in your company’s name, multi-currency balances, and 24/7 currency conversion. We offer rapid and secure payments to 200+ countries, along with real time tracking and reporting to ensure you can make international business payments with ease.

NewbridgeFX:
Products

NewbridgeFX offers a specialist service in the deliverable foreign exchange market, promoting a range of products and services, available online or over the phone. Our products have been designed to meet the needs of our clients. A lot of these products are ways for businesses, and individuals, to manage and mitigate currency risk, and are used frequently during times of increased volatility. Alongside up to date foreign exchange related market news, which works in tandem with our range of products. 

Spot Contract

Lock in an exchange rate for immediate onward settlement. Funds can be received the same day.

Forward Contract

Lock in an exchange rate today, but for settlement at a later date that suits you, up to 12 months in the future.

Market Order

We monitor the markets real time and take action to trade between currencies when your desired rate is achieved.

Rate Alerts

Set an alert for phone or email notification when an exchange rate has be achieved to take advantage at the best time.

Products:
Manage Risk

NewbridgeFX offers a specialist service in the deliverable foreign exchange market, promoting a range of products and services, available online or over the phone. Our products have been designed to meet the needs of our clients when sending money overseas, and are ways for businesses, and individuals, to manage and mitigate currency risk. 

Spot Contract

Lock in an exchange rate to settle immediately. Funds can be received the same day for most currencies.

Forward Contract

Lock in an exchange rate today, but for settlement at a later date that suits you, up to 12 months in the future.

Market Order

We monitor the markets real time and take action to trade between currencies when your desired rate is achieved.

Rate Alerts

Set an alert for phone or email notification when a rate has been achieved to take advantage at the best time.

NewbridgeFX