If your business deals with companies overseas and you’re using your bank or manual ways to pay international invoices, the costs can really start to add up. Unlike local invoices, transacting in multiple currencies can come with extra charges like currency conversion fees, exchange rate margins, and money transfer fees.
When it comes to paying international invoices, simplifying the process can make life easier. Research shows that 84% of businesses find payments take much longer when local options aren’t available and 95% of vendors pay an invoice faster when the payment process is easy.
The good news is paying international invoices doesn’t have to be tricky or expensive. With the right information, you can make sure your payments go through smoothly without delays and surprise FX fees.
In this article we’ll guide you through how to pay an international invoice and ways OFX can help you manage paying overseas suppliers.
Best ways to pay an international invoice
When paying international invoices, it’s important to choose the best option for your business. Here’s a quick look at some different methods:
- Local bank account: Many business owners turn to their bank for international transfers, but banks can charge hefty fees. Small businesses may end up paying a lot in these fees alone, so it’s worth considering alternatives for international payments, such as accounts in the recipient countries.
- Opening a foreign bank account
If most of your international payments come from one country, it might be worth considering a foreign bank account. This can help you avoid many of the fees that usually come with international transfers. Keep in mind there may be an account keeping fee. - Online payment services: These services are convenient, but they can add extra fees on top of the exchange rate, plus any intermediary fees from your credit card or debit card issuer. These costs can add up fast.
- Credit cards: Paying an overseas supplier with a credit card is definitely an option, and many businesses use this method for smaller payments, especially online bills. However, depending on your credit card provider, you could face fees like international transaction charges, currency conversion fees or margins that may not be as competitive as that on offer from other providers, and interest if payments are late. While it’s convenient, these costs can add up quickly for large payments or frequent orders.
- OFX: For a cost-effective option, OFX offers international transfers with competitive fees and exchange rates. With access to over 170 countries and 30+ currencies, OFX makes it easy to pay international invoices.
Choosing the right payment method can save you both time and money, so it’s worth exploring your options.
What you need to pay an international invoice
Paying an international invoice involves ensuring you have the correct details and tools to process the payment efficiently, comply with your countries regulations, and avoid unnecessary fees. Here’s what you need:
The invoice details
- Supplier information: Full name, address, and contact details of the supplier or service provider.
- Payment terms: The due date, currency, and any late payment penalties.
The banking details
- The supplier’s bank name
- Account number
- SWIFT/BIC code and IBAN if applicable
- Ensure these are correct to avoid payment delays and help make it easier for you to pay your international suppliers.
Tax implications
There may be tax implications associated with paying international invoices. OFX doesn’t offer tax advice. You are therefore encouraged to seek professional tax advice regarding whether tax applies to your transactions and interpretation of tax rules.
Country-specific requirements
- OFX encourages all customers to understand how they may be affected by their local sanctions regimes as well as the regulations in countries that they are interacting with.
- Some countries may require additional documentation (e.g., declarations or proof of legitimacy) for receiving funds. Check local regulations to ensure compliance.
What to consider when paying an international invoice
Here are some factors to consider when dealing with overseas suppliers and paying international invoices.
Choose the right payment currency
- Paying in the supplier’s local currency often avoids hidden conversion fees and ensures the supplier receives the exact amount owed. For example, pay German suppliers in euros (EUR), British vendors in pounds (GBP), and Chinese suppliers in yuan (CNY).
Select reliable payment methods
- Evaluate payment options such as wire transfers, online platforms, and credit cards for their fees, speed, and convenience.
Streamline processing with technology
- Leverage invoicing platforms to automate processes, apply tax codes accurately, and sync information with your accounting or Enterprise resource planning (ERP) system. Automation saves time and minimises errors.
Top tips for paying an international invoice
- Negotiate with your suppliers to arrange a better deal
To make paying an international invoice easier, ask your supplier if they’d accept payment in your local currency. For instance, many companies in China are open to being paid in local currency.
If they agree, you can skip the hassle of converting your money to their currency, saving on conversion fees and avoiding the stress of fluctuating exchange rates. It’s a simple step that can save you both time and money, so it’s worth negotiating, whether you’re buying goods or services. - Choose a foreign currency account wisely
Compare accounts for upfront and monthly maintenance fees. Opt for one with low or no account-keeping fees to minimise ongoing costs. With the OFX Business Account, you can have access to more than 30 multiple currency accounts at no start up or maintenance fees. - Review exchange rate margins
These services are convenient, but they can add extra fees on top of the exchange rate, plus any intermediary fees from your credit card or debit card issuer. These costs can add up fast. - Monitor invoice payment margins
Some banks charge an additional margin when processing payments. Check this and consider alternatives if it seems excessive. - Avoid excessive international transaction fees
Review the costs for sending international payments. Some platforms offer free or lower-cost transfers, which can save you money compared to traditional banking fees.
- Mitigate currency fluctuation risks
Exchange rate volatility can increase costs unexpectedly. Use risk management tools like forward contracts to lock in favourable rates, protecting you from unfavourable changes.
*If you book a Forward Contract, it may mean losing out if the market rate improves because you’re contracted to settle at the agreed rate.
Exchange fees – How OFX compares to banks
When you use OFX to pay invoices in a foreign currency, you could save money over the high street banks. Some banks and online marketplaces charge up to 5% per transaction for currency conversions.
You’ll also need to consider the exchange rate for the country you’re sending money to. If their exchange rate is weaker than yours, you might snag a good deal – but the opposite is also true
If you know you’ll need to pay an overseas invoice soon, it’s worth keeping an eye on the currency exchange market. Tracking the exchange rate can help you better plan your business expenses and might even save you a bit in the long run.
Why choose OFX to help you pay an international invoice?
- Faster transfers with our local bank network
Your transfers can arrive faster. We use our global network of local bank accounts to transfer your money from our local accounts when possible. Local processing means we can often provide same-day payments. And you may avoid having to deal with all those confusing international bank codes. - 24/7 availability compared to other options and why that can help save money
You get 24/7 customer support, so you can book in your transfers anytime, not miss out on the exchange rate you lock-in, which may help expedite your supply chain. We can also mirror your internal verification processes, so that sign off is simple even when your boss is on holiday. When your bank is closed, we’re open.
- Manage your exposure to currency risk
You get a choice. We have a number of product options to help you protect your business from adverse currency fluctuations. - Secure and trusted
You know your money is secure. OFX is listed on the ASX and has a fraud team overseeing our operations. Regulated, trusted, secure – that’s OFX.
Doing business with companies overseas can be a great way to grow your business, and you may find better prices than you would at home. But if you’re not careful about how you pay those international invoices, your savings can quickly disappear with high exchange rate margins, currency conversion fees, and transfer fees.
Using a global payment and business financial platform like OFX instead of your banks, credit cards or other online FX options could help you save money and time.
Save on fees when sending money overseas
IMPORTANT: The contents of this blog do not constitute financial advice and are provided for general information purposes only without taking into account the investment objectives, financial situation and particular needs of any particular person. OzForex Limited (trading as OFX) and its affiliated entities make no recommendation as to the merits of any financial strategy or product referred to in the blog. OFX makes no warranty, express or implied, concerning the suitability, completeness, quality or exactness of the information and models provided in this blog.
