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For businesses selling on B2B marketplaces, there are key considerations when it comes to marketing and selling to customers in other countries:
- Is there demand for my product?
- How will I ship my product to the customers?
- Are there different laws or taxes I need to consider?
- Do I need to translate my product pages for certain audiences?
Setting up a marketplace business consists of many of these crucial decisions, but one common afterthought of selling online is invoicing and receiving payments from customers. This becomes even more intricate when customers and sellers span various borders and currencies.
When selling on a B2B marketplace, it's smart for businesses to stop and think about how they are going to collect the funds they are owed from online sales to international customers.
Foreign Exchange Basics
Before we dive into the various options for repatriating funds, let’s recap some of the basics of the foreign exchange markets. The exchange rate between two currencies fluctuates constantly throughout the day, so it’s hard to keep tabs on it entirely. However, one month might generally be a better (or worse) time to send an invoice asking for payment than it was last month.
For example, the exchange rate for USD/CAD was about 1.25 on July 7, 2021, but a month earlier on June 7, 2021, the rate was 1.20. That means in order for a Canadian customer to pay a US $10,000 invoice, it would cost them about CA $500 more than one month ago. Knowing that the customer might try to delay payment now and wait for a better exchange rate.
But the delay in receiving payments can lead to a longer days sales outstanding (DSO) for companies as they wait for cash. In order to decrease DSO and improve cash flow, businesses selling on B2B marketplaces can implement payment and invoicing practices that make it easier for the customer to pay their invoice in their local currency.
Ways to Pay
There are various methods businesses can use to pay for the goods they buy on online marketplaces.
- Debit/credit cards – Many businesses choose to use credit cards because it is convenient and does not require timely set up of accounts. However, some credit cards will charge a 3% fee on international charges and add on a foreign exchange markup. Credit cards also usually have charging limits.
- PayPal – While the convenience of PayPal is enticing for buyer and sellers, the fees and limits can also be less than attractive for those making international transactions on a regular basis.
- Bank transfers – If a company is already established at a bank, it may be tempting to simply make a traditional international transfer. However, in the correspondent banking system, to transfer funds from one country to another, there are often fees taken out at each step of the process. This can lead to the amount billed and paid not equaling the amount received in the end.
Rethinking Receivables
In order to get paid faster and ensure the full invoiced amount is received in local currency, it is important for the seller to take control of the situation. Instead of leaving it up to the customer on how to pay, billing businesses can turn to international payments firms like TransferMate to track and automate the entire process of international receivables, giving their customers clear payment instructions.
Billing businesses can send invoices to their customers through the TransferMate platform. The paying business then follows the secure link to select one or multiple invoices to pay, locking in a preferred rate. The business simply sends their payment to TransferMate in their local currency and TransferMate transfers the funds to the billing company in their local currency in their country. The payment is usually received on the same or the next day.
TransferMate handles the foreign exchange during this process, ensuring the rate booked by the paying customer and the amount of their local currency sent matches up to the local currency received by the billing company. Paying customers can then create a TransferMate account in order to streamline future payments.
TransferMate’s easy-to-use payments technology gives billing companies easy tracking and updates on invoices and payments, eliminating the need for administrative time spent reconciling payments.
Solutions like Transfermate ensure businesses selling on marketplaces like Alibaba.com get paid faster while automating invoice reconciliation, an essential aid to finance teams.
Are you looking to improve how you collect payments from B2B marketplace sales?
For more information, visit Alibaba or TransferMate.
This article was originally published by Alibaba.
