Payment Solutions and Foreign Exchange
Moving Business Online
The trend in the last decade has been towards an increasingly online customer base, who pay by methods other than cash. The COVID-19 pandemic has only exacerbated this trend. For many business owners, this has created opportunities to increase their customer base by moving more products online and shipping further than out through their front door.
However, this change has been increasingly rapid, just to keep doors open during the pandemic, and often businesses are using the first available solution to their payments.
Enabling the Customer Base
A common issue with many online payment platform is the inevitable surcharge. Either the customer is paying it or the business is absorbing it, but not every payment solution allows it to be passed on.
Even then, they often require a full payment at the time of the sale, but that may not suit your business. You may need to have recurring payments or payment plans or you may have customers who want to have an invoice automatically debit their accounts.
But most importantly, the key element for a payment platform is that it integrates with your current systems. The last thing any business needs is more unnecessary administration for items that can be automated.
This is why we recommend Pinch Payments, as it allows for this level of flexibility in payments, while also integrating with Xero and Dear systems. In addition, Pinch is Australian based so that customer service happens in your business hours, not someone else's.
But what about your Suppliers?
While many companies are working towards shortening and localising their supply chains, for many businesses, it's just not possible. Whether it's cost, expertise, availability of materials, you're importing it because it's the best choice for your business.
Whether you've recently expanded into offering products using an overseas input or whether you've always done it, the one constant is that you'll need foreign currency to settle your bills.
Fees, fees and more fees
The easiest one is to pay it from your existing bank account. It's already there, the bank will take care of it, and it's one less thing off your plate. Except that the main thing leaving your plate is your hard-earned profit.
There are two components to most foreign exchange transactions. The first is a straight forward fee, usually $5-$15. It's far from ideal, but at least you can see it. Alternatively, you might be paying a monthly fee to have access to FX payments.
The second component is the rate you're paying for each foreign currency unit. You might google it and see that each Australian Dollar is buying 0.75 US Dollars, but that won't be the rate you pay. Each provider will add a spread on top of this to reflect what they have to buy it for and their profit margin.
Bank transactions will slug you both the fee and a large margin on the rate, and if you've paid it using the company credit card, don't worry, they've got a fee for that too.
That's a lot of money just to pay a supplier. We recommend Airwallex as an FX payment solution, as it has neither a payment fee or an international card payment fee, and its spread is 0.3% on 10 major currencies, increasing to 0.6% on lesser used currencies such as the Swedish Krona.
Online subscriptions, payment controls and more
The old days of buying a software package outright are increasingly behind us, as most software companies work on a subscription based model. That's easy for managing cash flow, but they're often paid in USD or another foreign currency. This is another reason we recommend Airwallex, as these can be set up on virtual credit cards within your account and you can pay the cheapest rate on the automatic monthly payments, without having to manually pay it yourself each month.
It's not just virtual cards however, there are physical cards with no international transaction fees that can be issued to those people frequently travelling or who frequently make purchases in foreign currencies. These can all be controlled with payment limits set up in the system on each card.
You can also accept payments in foreign currency, without unnecessary conversion fees, or use a local bank account in 6 countries.
But more than that, it integrates with Xero so that your accounting system shows exactly where you are, without additional administration time that you could be putting to better use.