Seven Ways to Streamline Global Receivables

The opportunity for international expansion is on the minds of many CFOs.

But expanding a U.S. business internationally is not without its challenges.  Chief among them is how to ensure that the business can collect business-to-business (B2B) cross-border payments.

Cross-border business payments are currency transactions between businesses in different countries.  Historically, the payer chose a front-end provider – bank or money transfer operation – to move the payment, which the recipient received through whatever provider the payer chose.  Long settlement periods, high payment costs, and limited accessibility are some of the common problems with this approach to global payments.  As a result, it can be hard for businesses to collect global payments. 

This article provides proven strategies for streamlining the receipt of international receivables.

International receivables challenges

Selling goods and services in new countries is only one step in expanding internationally.  Businesses must also find ways to efficiently collect and repatriate the money earned from international sales. 

Here are some of the most common international receivables challenges that businesses face. 

• High days sales outstanding (DSO).  Inefficiencies in international receivables can have a significant impact on DSO, which is a measure of the average number of days it takes a business to collect payment after a sale has been made.  Global invoicing challenges and limited payment options are big contributors to delays.  The extra time and effort it can take to transfer funds through a web of correspondent banks also contributes to higher DSO.

• Multiple payment methods.  Global sellers must accept the preferred payment methods of customers in different regions.  While payment methods such as Automated Clearing House (ACH), cards, and wire transfers may be familiar to U.S. businesses, international sales also require sellers to support regional payment methods such as Boleto Bancario in Brazil. 

• Fluctuating foreign exchange rates.  Putting the foreign exchange burden on the customer comes with drawbacks – including unexpected fees resulting in short payments.

• Weak collaboration.  Resolving disputed invoice amounts and due dates requires strong collaboration and communication between billers and their customers.  But manual and semi-automated cross-border payment processes make it difficult for stakeholders to collaborate, often resulting in back-and-forth emails and phone calls that frustrate everyone involved.

• Bank account management.  Opening a local bank account is often one of the first things a business does when it expands internationally.  But managing multiple bank accounts and bank relationships can be costly and complex.  Businesses must consider how they will manage global treasury accounts, and whether they need to hold foreign and local currency. 

• Statutory and regulatory compliance.  Businesses must comply with regional, country-specific, and local regulations and laws governing the appearance and delivery of invoices.  Sellers also must ensure that the correct documentation is sent by the payer for U.S. tax purposes.  There’s also standards and regulations for data privacy and security.

• Inadequate visibility.  It’s not easy for many global businesses to know when a customer has paid, and what they have paid.  The root of the problem is that international wire transfers are received through a seller’s bank as part of a batch of international payments with minimal detail.  Short payments from foreign exchange rates and hidden transaction fees make it even harder to match payments to open invoices.  As a result, it can take weeks for finance staff to reconcile transactions, potentially contributing to high DSO, straining customer relationships, and impacting the customer’s ability to place new orders due to pre-set credit limits.

These challenges are enough to give a business second thought about expanding globally.  

Strategies for collecting global receivables

Inefficiencies in collecting receivables can make it harder for your business to grow internationally. 

Here are some strategies for easing the burden of collecting international receivables.

1. Think local.  No global customer wants the burden of translating invoices into the local language, calculating the correct payment amount, and hunting for hidden transaction fees.  And no supplier wants to run afoul of local regulations and laws on what an invoice must look like and how it must be delivered.  Look for an international receivables solution that supports local languages, considers fluctuating foreign exchange rates when generating invoices, and ensures the correct documentation is sent by the payer for U.S. tax purposes.

2. “Wow!” your customers.  Customers expect local payment options, whether they are paying via wire transfer, credit card, Automated Clearing House (ACH), or another method.  That’s why it’s key to partner with an international receivables solutions provider that understands the preferred payment methods for each country, supports multiple payment options from one platform, provides both parties with complete transparency, and auto-reconciles payments.      

3. Mitigate FX risk.  Fluctuating foreign exchange rates can make it difficult for global customers to pay billers the correct amount.  Reduce the financial exposure to your business by finding a cross-border payment solution that accounts for shifting foreign exchange rates.

4. Don’t face the regulators alone.  From taxes and regional restrictions to statutes and local regulations, processing global payments comes with a huge compliance burden.  No two countries have the same tax laws and regulations.  And some of the most desirable markets for international expansion have some of the most onerous tax laws.  It’s also not uncommon for laws and regulations impacting payments to suddenly change.  Compliance issues can result in big fines and penalties.  Leading receivables solutions ease a global company’s compliance burden by accounting for tax laws and regulations on a country-by-country basis.    

5. Don’t overlook support.  Billing and payments-related support calls are inevitable from anywhere a company does business.  Responding to these questions is no small feat for global businesses.  The more countries in which a company does business, the more languages and time zones it may have to support.  The challenge can be especially daunting when it comes to complex – and potentially contentious – issues such as refunds and chargebacks.  Few businesses have the resources or expertise to take on this burden.  Look for an international receivables solutions provider that will support customers on your behalf.

6. Don’t settle for silos.  The last thing any expanding business needs is fragmented systems that require the manual upload of information into a system of record.  Seamless integration between a cross-border payment solution and the system of record provides real-time visibility into the status of accounts and streamlines reconciliation.  Ensure that prospective international receivables solutions integrate with your system of record and workflows.

7. Prioritize track record.  There are lots of payment solutions out there.  But many of these solutions were built for low-value transactions, not global payments, and don’t have a track record in dealing with fluctuating exchange rates, global bank fees, and country-specific laws and regulations.  Global payments are no place for on-the-job training.  Issues with global payments can create major headaches for buyers and sellers, including supply chain issues and cash flow problems.  Ensure that prospective solutions were especially built to manage “high stakes” cross-border payments worth hundreds of thousands of dollars or more.   

These strategies will provide a solid foundation for effortlessly collecting international receivables.

Effortless cross-border payments

International expansion is on the minds of many businesses.  But successfully doing business overseas requires businesses to find ways to efficiently collect and repatriate money from global sales.  The strategies in this article will help businesses streamline their cross-border payments.