There are many things to consider when expanding internationally.
One matter that often gets taken for granted is the management of international payments.
There are many things to consider when expanding internationally. One matter that often gets taken for granted is the management of international payments.
You would think that this is something that should be getting easier and easier. Certainly, this was the case during the nineties and noughties as the internet replaced phone and fax based banking systems. Unfortunately, in recent years, compliance requirements are ever increasing meaning, if anything, the efficiency of this process is in reverse.
Companies doing business internationally face a number of issues regarding payments.
- Resource - most systems will not link seamlessly with accounting packages and so data may have to be entered manually or imported through files. Aside from the time cost, this carries with it the risk of error, be it in data entry or maintaining duplicate databases.
- Cost – international payments can be many times more expensive than domestic payments. Some of these costs, for example in bank fees, are obvious. Others, such as the exchange rates being applied, can be more difficult to quantify.
- Time - different lead times are required on payments to different territories and funds, especially if funds are sometimes being required to be moved between different UK based accounts to facilitate particular payments.
There are different solutions to overcome these issues which have relative strengths and weaknesses.
- A central treasury function - this has the advantage of specialised resource in house to manage risk and currency movement. However, such treasury management requires specialised expertise and, as such, tends only to be relevant for groups of a larger size.
- A relationship with a ‘global’ bank - there are few, if any, truly global banks. Many of the larger players are streamlining their operations rather than continuing expansion. Some of the larger banks can simplify things somewhat but are rarely a solution on their own.
- Forex brokers – can offer cost and efficiency savings. However, this is an extremely fragmented industry with many small players. There will always be doubts, rightly or wrongly, about the security of funds. If you are working with one broker you can never be certain that you are getting the best deal. There could be a significant time cost spent researching the market.
- Vostro accounts – these are individual named client accounts offered by certain forex brokers. In many ways, these would appear as being the "best of both worlds" between working with a global bank and a forex broker.
Blick Rothenberg Global Business Services has been making and managing international payments for over 30 years. As such we have experience of working with clients to facilitate payments in many different ways.
For more information, please contact your usual Blick Rothenberg contact or Jim Brown, partner, on +44(0)20 7544 8777 or at firstname.lastname@example.org