When you are running an international business, Making outgoing payments to your suppliers can be a headache. Your suppliers may prefer that you pay for goods and services before they deliver them, which can cause cash flow difficulties for your business. They may be willing to supply goods and services on credit, but charge you more for them. And they might want you pay in their currency rather than yours, which means you are exposed to losses due to fluctuations in exchange rates between placing the order and settling it.
Using a debit card or a pre-paid card also requires you to have funds available at the time of payment. Digital payment methods such as Bitcoin, Paypal or Apple Pay are fast and efficient, but still require funds to be available at or soon after the time of payment and exchange rates can be costly. For larger payments, Letters of Credit issued by your bank enable you to delay payments until goods and services arrive, but can be expensive.
Outgoing Payment Solutions For Better Cash Flow Management
Making online payments using innovative payment solutions such as American Express FX International Payments helps you to manage cash flow effectively. You can schedule payments to suit you and take advantage of exchange rate movements for easy settlement by bank draft, wire transfer or card. Reporting tools give you comprehensive information on cash movements, which can be downloaded to Excel or to your existing ERP or accounting software, reducing the need for slow and inefficient manual reconciliation.
Routinely using a credit card for payments, even larger ones where you may not want to risk funds in advance, gives you even greater control of your cash flow. Credit cards that offer interest-free periods on purchases can help you to take advantage of early payment discounts from suppliers while avoiding expensive fees and interest on working capital finance from banks.
Managing FX Risks
If you are paying large amounts in foreign currency, you may want to fix the exchange rate in advance. A forward FX contract locks in today's exchange rate for a payment to be made in say three months' time, while a “window forward" locks in today's exchange rate for a series of payments. Alternatively, consider using FX options to limit losses due to adverse FX movements while benefiting from favorable ones.
Above all, you need a payments service provider that provides a secure, reliable online solution, can handle all the currencies you use for both outgoing and incoming payments and has a reliable presence in the countries with which you do business.