When it comes to working with international suppliers, contractors and employees, navigating multiple currencies can be quite the challenge. Especially when it's time to settle invoices. The decision between paying in GBP or or converting everything to local currencies carries significant weight. So, let's dive into the benefits, drawbacks, and more importantly, when you should opt for FX international payments over GBP.
Benefits of Paying International Suppliers in their Local Currency
There are notable advantages to paying international suppliers in their local currency:
- Enhanced supplier relationships: By paying in local currency you’re making the payment process smoother for suppliers, and ensuring they receive the correct amount. This can go a long way towards fostering good, long-term supplier relations.
- Speedy payments: FX payments with Telleroo typically reach a recipient's bank account from 2 hours (SEPA areas) to up to 1 working business day.
- Easier reconciliation: With Telleroo, you can see the GBP amount and Cost to Send before you pay. However, these numbers will be combined and processed as one transaction when posted back to Xero, allowing you to reconcile international transactions without having to adjust the exchange rate.
Drawbacks of Paying in Local Currency
On the other hand, there are also drawbacks to consider with FX payments:
- Administrative Complexity: Managing multiple currencies can introduce administrative complexity, particularly if you have numerous international suppliers. Ensure team members are fully trained and have a set process for when to opt for FX payments and any payment approvals that are required.
- Exchange rate fluctuations: When making payments in your supplier’s local currency, ensuring they receive the correct amount to settle the invoice you may mean you see your GBP cost to send fluctuates.
- Hidden fees: As well as exchange rate fluctuations, you could also be hit with hidden fees depending on your FX provider. Always ensure you’re using a provider that shows you the full cost to send, including their fees!
When to Opt for FX Payments
- Currency Stability: If your supplier's local currency is relatively stable or pegged to a stable currency, FX payments can be a sensible choice.
- Supplier Preference: Some suppliers may prefer to receive payments in their local currency for reasons such as tax considerations, banking arrangements, or convenience.
- Streamlined Reconciliation: Paying international invoices with Telleroo simplifies the process of reconciling transactions in Xero. By eliminating the need for adjustments and including the cost to send in the transaction, reconciliation is easy.
- International Market Expansion: For businesses looking to expand into new international markets, paying in local currency can provide a competitive advantage. By operating in the local currency, companies can navigate the local business environment more seamlessly, open themselves up to more suppliers, establish credibility, and build trust with potential partners and customers.
If you’re looking to make foreign currency payments, be sure to try Telleroo for quick and easy international payments in Euros, US dollars, Australian dollars, Canadian dollars, Singapore dollars and Swiss Francs (further currencies coming soon!), and the ability to sync international invoices from your Xero account.
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