International business can make finance management more complicated.
It might start with a supplier in the US. A contractor in the UK. A manufacturer in China. A software subscription billed in euros. A customer paying in Canadian dollars.
Individually, each decision makes sense. Collectively, they can create a complex network of international payments, currencies and processes for your finance team to manage.
Every new currency exchange introduces another rate to track, another payment flow to manage and another transaction to reconcile.
One currency pair is simple. Ten isn’t. The cost can grow just as quietly as the complexity.
What an international payment costs your business isn’t always captured by the fee you see when you send it. There’s the margin in the currency conversion. Potential intermediary costs. Manual work in reconciliation. And the operational impact when payments don’t arrive when expected.
The question isn’t simply: What rate did we get?
It’s: What does this corridor actually cost us?
What is a currency corridor?
A currency corridor is the route money takes between two currencies.
If an Australian business regularly pays a US supplier in USD, AUD/USD is one of its payment corridors. Add a manufacturer invoicing in CNY and a contractor paid in GBP, and the business now has multiple corridors to manage.
Each corridor can have its own payment frequency, suppliers, transaction values, exchange-rate exposure, processing requirements and reconciliation work.
As the number of corridors grows, so can the number of places where small costs and inefficiencies add up.
When corridor costs compound.
Imagine a business making one international supplier payment every month.
The finance team knows the supplier. They know the currency. They know roughly when the payment needs to leave. The process might not be perfect, but it’s manageable.
Now, make that 30 suppliers across six currencies.
Some invoices arrive in USD. Others in EUR or GBP. Payment dates fall across the month. Exchange rates move between invoice approval and settlement. Transactions need to be matched back to invoices. Someone needs to check whether the supplier received the right amount.
Nothing is necessarily broken. There’s just more of everything. That’s where small inefficiencies can start adding up.
OFX’s North American1 and UK2 research found that many businesses experiencing currency volatility report unpredictable revenues or costs, complex reconciliation or accounting discrepancies, budgeting and forecasting concerns, reduced profitability, and payment delays or renegotiations.
So where should finance teams look for those costs?
Take control of your global finances. See how OFX can help your business.
Five costs hiding in your currency corridors.
1. The conversion
The exchange rate is the most visible part of an international payment. But this alone won’t tell you what the conversion will ultimately cost your business.
What matters is the total cost of converting your money into the currency you need. If you make occasional international payments, a small difference may not attract much attention.
Multiply it across recurring supplier payments, multiple currencies and an entire financial year, and the picture can change. That’s why corridor analysis starts with volume.
- How much are you converting?
- How often?
- In which currencies?
- And what is each conversion actually costing the business?
2. The payment
Conversion isn’t the only potential cost. Depending on how an international payment is made and where it’s going, there may also be payment or bank fees and other charges along the route.
Those costs can be easy to treat as incidental. But again, frequency matters.
A charge attached to one payment is one thing. The same cost appearing across dozens of monthly supplier payments is another. Instead of looking at payment fees transaction by transaction, look at them by corridor over a quarter or year.
You may find that your most expensive corridor isn’t the one moving the most money. It’s the one creating the most friction.
3. The reconciliation
Some international payment costs don’t appear on a bank statement – instead, they’re in someone’s calendar.
An invoice is approved at one value. Currency is converted to another. The accounting system needs updating. The transaction needs matching. A difference needs investigating.
Repeat that across currencies, suppliers and systems and reconciliation becomes a real operating cost.
In OFX’s North American research1, 38% of businesses affected by currency volatility reported complex reconciliation or accounting discrepancies.
That’s time the finance team isn’t spending on analysis, planning or supporting growth.
That means the time spent processing and investigating payments should be considered alongside their direct financial cost.
4. The delay
A payment isn’t finished when you click send. It’s finished when the right amount reaches the right recipient.
International payments can involve different payment systems and regulatory requirements.
OFX’s UK research2 identifies unexpected delays and uncertainty around costs as significant issues for businesses managing global payments. A delay can trigger more work. The supplier follows up. Finance checks the payment. Someone contacts the provider. The supplier’s records need reconciling.
If a time-sensitive payment doesn’t arrive when expected, the impact can move beyond administration. That makes settlement performance part of the corridor picture too.
- How often do payments arrive as expected?
- Where do exceptions occur?
- Which corridors create the most follow-up
5. The second conversion
One of the easiest costs to overlook is converting the same money more than once. For example, a business may receive foreign currency, convert it into its home currency, and then later need to buy that foreign currency again to pay a supplier.
Two conversions. Two opportunities for cost.
As your currency footprint grows, it’s worth looking at where money is coming from as well as where it’s going. If you’re receiving and paying in the same currency, does every transaction need to be converted immediately?
The answer will depend on the business and its cash needs. But the question is worth asking. Sometimes controlling corridor costs isn’t about finding a cheaper transaction, but about removing a transaction you didn’t need in the first place.
38% of North American businesses affected by currency volatility report complex reconciliation or accounting discrepancies.1
Map your international payment footprint.
Before you can control corridor costs, you need to see them. Start by mapping every currency your business sends and receives.
For each corridor, capture:
| What to map | What you’re looking for |
| Currency pair | Which currencies are being converted? |
| Annual volume | How much money moves through the corridor? |
| Payment frequency | How often are you making transactions? |
| Payment/provider costs | What does sending the money cost? |
| Conversion | Where and how often is currency being converted? |
| Settlement | How reliably do payments reach recipients? |
| Reconciliation | How much finance-team work follows each payment? |
| Systems | How many platforms or processes touch the transaction? |
Don’t worry about making the first version perfect. The aim is to see patterns. You might discover one high-volume corridor where a small cost has a large annual impact. Or a low-volume corridor that creates disproportionate reconciliation work. Once you can see the corridors, you can decide where to focus.
Find where the cost is compounding.
Once you can see your corridors, rank them. A simple way to do that is to look at three things:
- Volume: How much money moves through this corridor?
High-volume corridors deserve attention because even small efficiencies can scale. - Frequency: How often does it move?
High-frequency corridors deserve attention because small costs repeat. - Friction: How much cost, manual work or unpredictability comes with it?
High-friction corridors deserve attention because the cost may be operational rather than something more obvious.
The biggest opportunity may sit where all three overlap. This is also where finance teams can challenge inherited processes.
- Are we using a particular payment method because it’s the best fit today, or because it’s how we’ve always done it?
- Are we converting currencies when we need to, or simply when money arrives?
- Are different teams using different providers or systems for similar payment needs?
OFX’s North American research1 found that finance leaders see tangible opportunities to improve payment and expense processes through steps including eliminating redundant tools and moving to more cost-effective providers. International growth changes the payment footprint.
The process that worked for one corridor may not automatically work for another.
Your corridors are part of your infrastructure.
Adding another supplier, customer or market doesn’t necessarily mean adding another payment process.
Once you’ve mapped and prioritised your corridors, look for opportunities to remove unnecessary steps:
- Can more currencies be managed in one place?
- Can international supplier payments follow the same workflow?
- Can payment data flow back into the systems finance already uses?
This can help reduce unnecessary steps and costs as your business grows.
Know your corridors. Then decide where you can simplify them.
See how OFX can simplify
your currency corridors.
Sources
OFX, From complexity to control: How CFOs are rethinking spend management, North America.
OFX, From Complexity to Control: How CFOs Are Rethinking Spend Management, UK.
