As the global supply chain continues to face shortages, disruptions, and delays due to the pandemic, companies are scrambling to get the goods they need. In today’s global economy, an ever-growing number of suppliers are based overseas, making it even harder to secure product. So, how can a company move to the front of the line in the competition for limited goods? One way to become a preferred buyer is by giving international suppliers what they really want: a faster, more seamless payment experience.
In addition to the logistical challenge of moving goods from one country to another, there are issues with the traditional process of making foreign exchange (FX) payments. This legacy process requires payment to pass through multiple intermediaries, which not only each take a cut along the way, but also slow down the process, making suppliers wait longer for payment. Because of all these fees, suppliers also receive less money and often don’t know how much money they will actually receive in the end, making reconciliation more difficult.
It’s easy to see how traditional FX payments don’t endear buyers to their international suppliers, and when they decide which orders to fulfill first, that a faster-paying buyer might get preference. In addition, the challenges with FX payments raise a more practical issue. Since suppliers depend on cash flow to produce more goods, when payments get delayed, it can slow down their ability to crank out more goods. And that can lead to production delays, which compound the supply chain shortage in a vicious cycle.
How to improve the FX payment experience for your international suppliers
The good news is that you can avoid all those problems by using a payment services provider that executes FX payments using a global network of bank accounts. Here’s how it works: the provider pays your suppliers using local banks in their countries, so payment is direct, avoiding intermediaries.
Your suppliers will like getting paid this way because it provides four key benefits:
- Faster payment. Just as there are three rules in real estate, there are three top rules in supplier payment: speed, speed, and speed. There’s nothing suppliers want and appreciate more than getting paid on time. When you use a payment provider with a global network of bank accounts, funds can be received in 1-2 days, instead of the average of 3-4 days using the legacy FX payment approach.
- Getting paid the actual invoice amount. Near the top of the supplier wish list – right up there with prompt payment – is receiving full payment for the goods provided. If you use a provider with a global network, the supplier will receive full payment for the invoice because there will be no hidden fees along the way that eat away at the payment amount.
- Receiving remittance emails with payment. Your suppliers will receive an email with remittance details at the same time the payment goes out, so they will know precisely how much they’re getting paid, and for what.
- Easy reconciliation. Because the payment amount matches the invoice, and suppliers receive remittance info at the same time, reconciliation is simple.
AP Automation platforms with built-in FX payments offer additional value for buyers
Ideally, the FX payments capabilities described above are embedded in your AP automation platform, allowing you to manage the full invoice-to-pay process for international invoices. While being a good buyer – and becoming a preferred trading partner — is a reward in-and-of itself, this approach unlocks additional value for your organization. Here are just three of the many benefits:
- One workflow for domestic and international payments. The right AP automation platform provides a single workflow for both domestic and international payments, allowing you to authorize and execute check, ACH, virtual card, and FX payments in the same payment run. Having everything in one place makes your life easier, simplifies reconciliation and audits, and provides a consolidated view into payments.
- Streamlined multi-currency invoice processing. In addition to streamlining the FX payment process, these platforms also streamline processing of multi-currency invoices. For instance, the system will automatically capture and code invoices in all currencies, route them through approval workflows, and post them to your ERP system.
- Access to real-time exchange rates. Some global payment providers offer real-time exchange rates, giving you a better chance of getting more favorable rates and reducing your FX payment costs. Traditional providers lock-in exchange rates daily and build in extra margin to hedge against intraday currency fluctuations, which ends up costing you more.
The right approach to FX payments unlocks competitive advantage
Becoming a preferred buyer is more critical than ever in today’s challenging global supply chain environment. By giving global suppliers the expedited FX payments that they want – along with a better overall experience – you can increase your chances of moving to the front of the supply chain line to get the goods you need for running and growing your business.