If your small business sells your products or service to international clients, then you’ll need to know safe and inexpensive ways of accepting payments. It’s important to have the right processes in place so you’re aware of any hidden costs or high transaction fees. Although many businesses simply use their business bank account to accept international payments, there are other cost-effective ways to send and receive payments.
1. What Is an international payment?
An international payment refers to a transaction between a buyer and a seller that involves two currencies and crosses borders. This is in contrast to a local payment whereby a payment is made within the same country. When money is transferred to another country, the amount has to be converted into the currency of the new country.
2. Why accept international payments?
Receiving international payments for your business if crucial for taking your small business to the next level and trade globally. You’re able to attract new customers, thereby increasing revenue and brand awareness, resulting in opening up new opportunities. Because shopping and payment trends can differ between different countries, it’s beneficial to find a provider that embraces a range of payment preferences.
3. How to Accept International Payments
Whatever ways you choose to accept international payments for your small business, make sure that when you send an invoice, all your details are correct and clearly presented. Also, provide overseas customers with more than one option to pay you and this can help to get your invoices paid quickly.
3.1 Online payment gateways
Using an online payment gateway is one of the most easy and secure ways of receiving an international payment. All you need is your banking details to start off. They usually have quick processing times, usually within a few days, and offer complex encryption for money transfers. However, each payment provider will have charges for their transaction fees, up to 5% in some cases. Therefore, if you’re receiving international payments on a regular basis, these fees can add up considerably.
PayPal has always been a popular choice for accepting international payments. However, more recently, it has got some serious competition from other providers. Examples include, Stripe, Amazon Payments, Braintree, Google and Apple Pay.
3.2 Credit/debit card processors
Allowing international payments to be processed via a credit/debit card is relatively easy to set up and integrate on your website or invoicing software. Using a payment processor such as Stripe, customers can pay in almost any currency. If you have a service-based business, taking direct debits for clients wanting to pay in instalments is the smoothest way to accept a transaction. Simply, set up a payment plan for how much and how often they need to pay you.
3.3 Standard bank transfer
Every UK bank will process an international payment but you should compare the rates and fees for accepting this method. You must include your IBAN (International Bank Account Number) and Bic (Bank Identifier Code) numbers on your invoice. This is in order for the payment to be processed through your business bank account. However, you should be aware that international money transfers can take up to five working days, depending on which country the money is being sent from.
3.4 A multi-currency account
Using an online multi-currency account, such as from Wise (formerly TransferWise), gives you the freedom to accept local currencies, make payments and will hold funds all in one place. This equates to improved exchange rates, speedy transactions and more convenience for both your and your clients. In addition, there are no charges for using setting up an account nor to receive payments. However, the amount of money you can receive is limited.
4. Things to look out for:
The biggest concern for handling international payments is the high transaction fees. Poor exchange rates can also affect the price of your services or products. Therefore, comparing different providers initially and then keeping an eye out for hidden fees after a transaction has been processed can help to find the best cost-effective solution. When you add these charges to the costs of shipping and taxes, you need to be careful you’re not out of pocket when handling international payments.