When it comes to paying foreign suppliers, is it better to pay in local currency or USD? Choosing the right currency to pay your vendors can help you save a lot of time, skip hidden fees, avoid risks, and bypass reconciliation headaches.
There are so many benefits to making vendor payments in local currency. Check out these 5 reasons why paying in local currency is the way to go when it comes to foreign transactions.
1. Send payment faster to your vendors and clients
If you have international payments due and choose to pay in US dollars, those funds need time to convert and that usually occurs at the foreign vendor’s international bank. Also, because another financial institution has to cover the funds, the transfer can take longer.
Why have your vendors wait? Instead, if you use your vendor’s local currency you cut out the middleman, so the funds are streamlined and delivered faster.
2. Compare rates in advance and select the best option
Skip the guesswork when it comes to converting foreign currency for overseas vendors. Because international vendor’s bank in US dollars, the bank automatically converts funds to the local currency without comparing rates–resulting in poor exchange rates and sad pockets.
Instead, make sure you have the best exchange rate possible when making payments. That way your client and vendor get paid without you having to incur a high price. Your currency choice can save you money in the long run.
3. Keep vendors happy with exchange rate certainty
Since exchange rates fluctuate, vendors can sometimes pad their quotes on their invoices a bit to guarantee their work isn’t being undervalued. On the other hand, when you pay in local currency, the exchange rate is calculated upfront. This is a win-win for everyone—the vendor gets reassured they will get paid fairly for their services, and you can guard against currency value swings.
4. Ditch hidden fees
Cut out the middleman (or at least their hidden fees). Intermediary banks will sometimes be involved in delivering funds when payments are made in US dollars–which means more fees. Fees charged by an intermediary bank can cause vendors to increase their invoice to offset the extra cost. Reduce these hidden costs by scrapping the extra step and wiring your vendor their pay in the local currency.
5. Balance the ledger with ease
It's much easier for companies to balance payment in the same currency. If your vendor’s Accounts Receivable ledger is in euros, its reconciliation team may struggle to match your US dollar payment credit. This is because the converted amount won’t match the amount on the invoice.
To improve the account reconciliation process, it’s much easier to match credits to invoices in local currency. For example, €100 to an exact €100 payment versus $116.35 (based on a previous exchange rate).
So, you definitely should pay in local currency.
What happens if your vendor wants to get paid in USD?
There are times when paying in USD is a better option for a vendor. A vendor might want to get paid a USD rate because their local currency fluctuates in value which affects the vendor’s pay and your cost. If that is the case, you can avoid additional fees, uncertain rates, and a difficult reconciliation process, by choosing a single payment provider that can handle multiple exchanges for your business–all in one place.
Make international payments easier with BILL
Have BILL do heavy lifting for your international payments, save money and keep your payment process efficient. Spikeball™, the world’s newest up and coming sport, did just that and seriously cut down on the back and forth transfers that were costing them money and eating up so much time.
“BILL enables us [Spikeball™] to pay our overseas vendors in local currencies or US dollars. We used to have to go to our bank to send wires. Each transfer cost $15 and would take at least 15 minutes. That really adds up when you have hundreds of bills to pay each month! With BILL, it’s a 1-click operation.” - Spikeball™ Finance Manager, Jurie Victor
BILL makes cross-border payments just as easy as local ones:
- Send global payments to 137 countries including the Eurozone, UK, India, and China.
- Track your payments in U.S. dollars for a better wire transfer fee than most banks.
- Count on no wire transfer fee in 106+ currencies.
- Streamline your business with one process for domestic and international payments.
Learn more about how BILL can help your business pay vendors in their local currencies, so you can save time, avoid hidden fees, and keep your ledgers in sync.