International business to business payments

Perhaps you’re starting a new online business, or expanding your current company’s eCommerce operations abroad. For the first time, you may need to make regular business to business (B2B) international payments to a supplier, contractor or possibly even staff in an overseas office. 

Whenever you are exchanging one currency to another you will want to limit your exchange rate risk and keep bank fees and charges to a minimum. After all, every extra cent you pay in fees or foreign exchange (FX) margins, means less profit for your business.

But finding the cheapest deal for your business money transfer isn’t always simple. Because exchange rates are always fluctuating, what’s considered ‘cheap’ can also vary from month to month. In 2020, for instance, there’s been a lot of volatility, with the Australian (AUD) dollar plummeting to 55 US cents back in March before hitting highs of 74 US cents in early December. For a business, a ‘good’ exchange rate would look very different during those two time periods. 

With that in mind, let’s take a look at some of your options for making international payments as a business. The option you choose will largely depend on how frequent and how large your transactions are.

• Business credit card
• Online bank transfer
• Foreign exchange specialist
• Foreign currency account

For small or irregular payments to an overseas vendor or supplier, you might be able to make a payment via a business credit card.

Just remember that with credit card purchases, you’ll usually be paying a foreign exchange fee of 3.00% on top of the AUD purchase amount and you won’t be able to lock in the exchange rate in advance. That means you’ll be charged at the exchange rate determined by your bank at the time of the credit card transaction, which could be better or worse depending on where the market sits at that moment.

There are several ways that you can make an online transfer to an overseas bank account. If your business bank account has online banking, it’s likely that you’ll be able to make direct payments to an international bank account from your computer or mobile the same way you make ordinary online payments. 

Generally though, the amount you’ll be able to transfer with this method will be subject to daily withdrawal or ‘pay anyone’ limits that you have set up on the bank account. The exchange rate that you will get for your transaction will be locked in at the time of the transfer, and you will also pay a transfer fee per transaction.   

An alternative to using your business bank account to make overseas payments is to go through a specialist foreign exchange provider or international money transfer specialist. Generally-speaking, these providers offer businesses more competitive exchange rates and lower transfer fees than major banks in Australia.

In most instances, you’ll be able to transfer money directly via the provider’s online portal - you set up an account, transfer your AUD to this account, then they convert your AUD into your currency of choice and deposit the funds into your recipient's bank account.

Specialist international money transfer providers often have a broader range of product options available for businesses that need to transfer money internationally on a regular basis. Some of these features can help safeguard your business against exchange rate fluctuations, allowing you to access favourable rates even if the market isn’t in your favour. 

Your options include:

• Spot rate transfers. This type of transfer is the most common. You get the ‘spot rate’, which is the exchange rate that the currency is trading at on that day and time.
• Forward contract. This allows you to lock in a deal at today’s exchange rate, for a transfer in the future, sometimes up to 2 years in advance. Say for instance, your business makes an international order which is due for payment in 90 days. But you’re concerned that if exchange rates move too far against you in that time, this will significantly impact your cash flow. With a forward contract, you can secure today’s rate and pay the invoice in 90 days, knowing your exact cost for transferring the funds.
• Limit order. This might be a suitable option if you are transferring funds to a company bank account in a foreign country where the timing isn’t important but the exchange rate is. A limit order allows you to set the exchange rate at which you want your transfer to take place. For instance, you might only want to transfer money to the US when the exchange rate reaches 70 US cents.  
• Multi-currency accounts. As a business, it’s likely that you’ll need to make regular payments to international suppliers or staff. Many IMT providers have products similar to foreign currency accounts (outlined below) that will help you to reduce the cost of regular transfers and limit your exposure to currency fluctuations. Businesses who have these accounts can send or receive money in many different currencies, so they won’t lose out to high FX fees when converting foreign currency (say, from their US supplier) into Australian dollars or vice versa.

To find out which providers offer international money transfer services to businesses, head over to our business money transfers comparison hub. There you’ll find a list of providers and details about their exchange rates and transfer fees.

If you’re a business with offices in numerous countries around the world, another option that many major international banks like Citibank, HSBC, ANZ and Westpac will have available is a foreign currency account. This is a bank account that allows you to hold multiple currencies in one place, so you can transact between different currencies easily and manage your international cash flow effectively from Australia.

If you are dealing in international currencies, of course one of the most important factors as a business is ensuring you get the most competitive exchange rate for your transactions. Just be aware that there isn’t one best provider for every currency but there will be a provider that has the best rates around for the currency or currencies that you’ll need to transfer to.

Mozo’s handy business money transfers comparison table helps you compare at a glance and see which provider has great exchange rates for the currency you need to exchange. Exchange rates on our site are updated hourly so you can be sure you are getting as close to the live rate as possible.  

In addition to the exchange rate, other factors that might play a role in your decision are:

• Transfer speed. Some providers are able to transfer money more quickly to one currency than another. So if you need to send pounds you might find that provider A can do a same day transfer but provider B will need 3 business days. Generally speaking, the time for major currencies is usually between 1 - 3 business days, while more exotic currencies can take longer.
• Transfer fees. Most banks and IMT providers will charge you a flat fee for each transfer. Online transfers are generally cheaper than over the phone or in branch transactions. Some international money transfer specialists don’t have fees for transfers over a set amount, so if you are transferring a large amount this is worth considering.
• Transfer limits. Some providers will have minimum transfer requirements while others will only allow transfers up to set maximums. There are also providers that don’t have any limits at all. The important thing is finding a provider or providers that will be able to serve the needs of your business on an ongoing basis.
• Platform security. The IMT providers listed on our website transact millions of dollars annually and are regulated by ASIC (Australian Securities and Investments Commission) here in Australia. IMT providers have secure payment technology to ensure your funds are transferred safely. It is up to you however to ensure that you provide the correct business name and bank account details for the recipient of your funds, as they will not be liable if you transfer funds to a wrong account (although there are steps you can take to get your money back).

Want to see which providers are offering the most competitive exchange rates and the lowest fees for your next money transfer? Then compare IMT specialists side by side, in our comparison hub, or use our nifty tool below.