Cross-border commerce has been on the rise since 2020. In ecommerce alone, it’s estimated that 71.8 million US consumers of ages 14 and older will buy across borders, up 25% since 2019.
Whether it’s goods or services, businesses are no longer restricted to the options that are close to them. You could source manufacturing supplies from China, hire a German marketer, and source a packaging design from a Brazilian artist, all without leaving the comfort of your computer.
But with these new-found options comes a new-found conundrum: how do you pay foreign providers?
Fortunately, it’s easier than ever to send money internationally. We’ve got the guide you need to know how.
Understanding international business payments
International business payments is a blanket term that refers to any time a payment is made across borders. It could be used to refer to any circumstances of a business making a payment with a destination bank in a different country than the origin bank.
It’s only an international business payment if the destination bank is outside of the borders. Sometimes foreign companies or individuals have a presence in the US and have a US bank account for accepting payments. These are not international business payments.
Different payment networks support international payments. For example, the SWIFT payment network connects banks internationally to enable the transfer of money from one bank to another.
Typically, these payments deal with multiple currencies which adds some complications. Payments often go through multiple stages, intermediaries, and exchanges before they ultimately end up in the receiver’s bank account.
How international payments are different from domestic payments
While international payments and domestic payments have a common goal of sending money from one business to another, they have very different processes and considerations.
Accommodating institutions
Many banks and financial institutions have systems that make domestic payments easy. From ACH payments to digital checks and everything in between, you have a wide array of options to send money within the country.
You don’t have the same luxury with international payments.
Your bank may offer international payment options or you’ll have to look at third-party options for sending money abroad. Transfer services like Western Union are popularized for how they make international payments accessible to everyone.
Currency exchanges
It’s inevitable that when you send money to another country that it will have to be converted to the local currency.
Currency exchange rates fluctuate and this could impact what you’ll need to pay. If you agree in a price in US dollars, payments are predictable, but if the price is in the local currency, that amount will change regularly.
In some cases, the amount you send could end up more or less valuable by the time it lands. You should think about whether you’re going to pay in US dollars or a foreign currency ahead of time (and we have 5 reasons to send global payments in local currencies).
Processing times
Domestic payments have a simplified process. With a well-established network (the ACH network) that processed 31.45 billion transfers in 2023, money easily flows from one institution to another and can be completed as quickly as the same day.
International payments aren’t as straightforward. The transfer goes through more checkpoints and processes before the funds are released to the receiver.
An international payment can take up to five business days to be completed, depending on the method used. It’s best practice to initiate a payment well ahead of the deadline in case the processing time runs long.
Costs and fees of payment
Just as the complications of navigating currency exchanges and international regulations slow down the processing times of international payments, it increases the associated costs of completing the transfer.
International payments typically charge three different fees on a transaction:
- Sender fee—paid by the sender at the point of initiating the payment
- Currency exchange fee—paid by the sender at the point of the payment being converted to the destination currency
- Receiver fee—paid by the receiver at the point of the payment being completed
Compare that to domestic payments, which don’t charge as many fees and are sometimes even free to send.
Involvement of intermediary banks
More often than not, domestic payments are a straight line transfer from one bank to another.
This isn’t true for international payments. When you send an international payment, it’s making multiple stops at intermediary financial institutions in different countries.
For example, a payment to a contractor in Scotland may go from the US to England before being transferred to the Scottish bank.
Watch out for intermediary bank fees. What’s listed as the cost of an international transfer may balloon as each bank involved in the process wants to take their cut.
How do international business payments work?
International business payments are bookended by a payment being initiated and then received. But what happens in between is a lot more complicated.
How the process plays out depends on the method of sending money being used. Generally speaking, you can expect the following steps to happen:
- Agreement: Both parties agree to the terms of the payment including the amount, currency, and payment method
- Initiation: The payer submits the payment information and necessary details to the network being used and set the wheels in motion
- Processing: The payer’s bank sets up the transfer and removes the funds from the account and the money is officially in transit to the destination
- Intermediaries: The money may be transferred to intermediary banks or financial institutions that help facilitate the transfer if a direct route is not possible
- Currency conversion: This step may happen at the originating bank, an intermediary bank, or the recipient’s bank and fees may be applied
- Transfer completion: The funds reach the destination bank and are deposited into the recipient’s bank account
Best practices for sending and receiving international payments
Choosing to conduct business across borders shouldn’t cause headaches when it comes to sending money. Follow these best practices to save yourself the stress.
Follow exchange rates
Exchange rates will dictate how much you’re sending or receiving in an international transfer. If you make or receive a payment at the wrong time, you could be losing money.
A common practice for businesses receiving a large amount of international payments from a specific country is to open a bank account in that local currency. They hold payments in the account until the exchange rate is favorable before initiating a transfer.
For sending payments, wait until the exchange rate is in your favor before making the transfer. For example, if you have 30 days to make a payment and on the tenth day the exchange rate dips, you might want to jump on that opportunity to save some money with an early payment.
Know your costs
International payments often come with higher costs than domestic payments. When buying across borders, it’s worthwhile to compare domestic options that won’t come with the high fees of international payments.
Sure, you may be saving money with a cheaper option abroad. But if the fees are high enough, the international option might end up costing you more money.
Don’t wait until the last minute
The timeline for an international payment being completed is longer and, if you’re not careful, it could result in a late payment.
You should plan on an international payment taking at least five days to be completed. While it could take less time, it’s best to plan for a worst case scenario.
Late payments can sour relations or even result in being charged fees. If you want to avoid upsetting your vendors, initiate the transfer well ahead of the deadline.
Be careful sharing your information
You may need to share sensitive banking information to complete an international payment. Before you do, think about who you’re sending it to and how.
Look to use vendors that are established and have a history that builds confidence. They should have reviews or past purchasers that can attest to their legitimacy.
When sending information by email, consider using encryption or password protection. Or, if you have multiple channels of communication available, send parts of the information in different ways so it needs to be pieced together on the receiving end.
Stay on top of your recordkeeping
With the complexity of international payments comes the need for clear recordkeeping and maintaining supporting documents. All receipts, payment confirmations, and invoices should be kept in a safe place and easily accessible.
If you’re thinking of taking the route of opening up a foreign currency bank account, you should get familiar with the ins and outs of multi-currency accounting.
How to send international business payments
You’ll most likely use one of these three common international payment methods to send and receive money abroad. Get familiar with them to know which is right for you.
International wire transfer
International wire transfers are offered by some banks or wire transfer services like Western Union or BILL.
How it works is you submit the request and pay a fee upfront to complete the wire transfer. Once the information is submitted and fees paid, the money is sent in transit to the destination bank and you’ll be notified when it’s completed.
It’s most likely the wire transfer must come directly from your bank account, meaning you won’t be able to charge it to a credit card.
Online payment platforms
Payment processors like PayPal and Stripe are one of the simplest ways of sending money internationally. You’ll have the option of charging a payment to your bank account or credit card and once that’s done, the transfer process is completely handled for you.
The downside is that the supplier needs to be using an online payment platform for it to be an option to send them money. With their fee structures and suboptimal exchange rates, it’s not as friendly an option for the receiver who incurs higher costs and loses more money on the transfer.
Foreign exchange brokers
For larger international payments, it may be worth using a foreign exchange (or forex) broker. Forex brokers buy and sell foreign currencies in large amounts, which gets them access to better exchange rates.
But forex brokers are fairly limited in the situations they’re usable. They’re most often used for large amounts or recurring transfers which are set out in an agreed upon contract. They likely won’t work for one-off, small payments.
Ready to streamline your international payments?
BILL Accounts Payable empowers your team with a single, straightforward process for both domestic and international payments to over 130 countries. No more struggling with double data entry. With BILL, you can pay vendors more cost-effectively, putting you in control of your financial operations.
For example, since joe, a Washington-based company, started leveraging BILL Accounts Payable to pay overseas engineers, they've cut the time spent paying engineers from hours to 4 minutes a month. They've also eliminated the need for a staffing agency, enabling them to better compensate their engineers.
"With BILL Accounts Payable, we've streamlined our international payments process, we don't have to hire a staffing agency and can pay engineers directly. Being able to pay engineers through BILL has changed their lives and allowed them to view us as a huge opportunity. It lets us recruit and retain the top talent needed to help us build awesome, stable, consistent technology."
—Brenden Martin, Co-CEO and Head of Product, joe
Learn more about how your team can streamline international payments with BILL.
International business payments FAQ
How long do international business payments take?
The amount of time it takes for an international business payment to process will vary depending on the origin country, destination country, and payment method. Generally speaking, you can expect an international payment to take anywhere from one to five business days.
Can you send ACH payments internationally?
While ACH payments started as a domestic-only service, international ACH transfers are starting to be offered and may be an option depending on both the origin and destination bank. Both banks need to be part of the ACH (Automated Clearing House) network for it to be a possible payment method
What’s the best way to accept international payments?
There’s no one-size-fits-all solution for international payments. Instead, you should offer multiple international payment methods to your customers to ensure everyone has access to your goods or services.
For example, you could offer international wire transfers for how universal they are and an online payment platform for ease and security. Then you and the buyer can agree on the method that costs the least amount of money and is available to them.
