How to Manage Your Accounts Payable for International Contractors

When you take your business global, you’re going to have to contend with international accounts payable – and it’s not the same process as domestic accounts payable. When it comes to paying your international contractors, you’ll find yourself grappling with foreign exchange conversions, different VAT regimes and cross border regulations. It can feel overwhelming, so we’ll guide you through it with best practices for cross-border payments, international payment compliance, automation and global cashflow control.

International contractor accounts payable

Whether you’re paying overseas contractors or freelancers, or sending money to pay for goods and services you’ve bought from abroad, you’ll need to make cross-border payments. International accounts payable are unavoidable if you want to unlock global growth. However, the right digital payment platform can help you manage accounts payable globally effectively and efficiently.

There is a wide variety of methods to make international contractor payments, from traditional banking systems to international AP automation. Global accounts payable processes include:

• International wire transfers made through SWIFT – the drawback of these is that they can be expensive. You’ll need the payee’s IBAN, routing number and SWIFT code.
• Global ACH – if it’s available in the destination country. Some countries don’t have the banking infrastructure for ACH, in which case you’ll need to use a different method. Although low-cost and effective, using Global ACH can be slow, with funds taking between three to five working days to arrive.
• Credit cards – good for fraud protection but the foreign exchange fees can be particularly steep.
• Prepaid debit cards – these allow the recipient to make payments or withdraw funds from ATMs. Fees and FX costs vary widely, and debit cards don’t provide the same level of fraud protection as credit cards.
• Digital payment platforms, such as Payoneer – using a digital payment platform (DPP) for international payments makes a lot of sense. You can make direct payments to recipients’ bank accounts or you can use virtual debit or credit cards provided by the platform. If both you and the recipient have Payoneer accounts, there’s no charge and transfers are fast, typically processed within minutes or a few hours.
• International money transfer services – companies such as Western Union or MoneyGram offer traditional transfers, while newer fintech services offer quick, low-cost transfers between eWallets and prepaid debit cards.

A new era of international AP automation

If you need to make bulk cross-border contractor payments, the best way to do it is with accounts payable automation software. A good provider of automated AP will sync with your payment platform to offer a range of payment methods in multiple currencies, as well as including functions such as supplier validation, FX, regulatory compliance and tax reporting, invoice capture and processing, status reporting and batch payment reconciliation. 

The challenges surrounding global vendor payments

You’ll need to get your head around international accounts payable if you want to expand your business overseas, so putting an effective global accounts payable process in place is critical. That said, it pays to be aware of the challenges from the start so you can counter them appropriately.

It’s a complex area and certain factors deserve your attention:

• Cross-border compliance and regulations – these vary between countries and failure to comply can be expensive. Using a DPP such as Payoneer may offer faster processing compared to some traditional methods.
• Timing issues – cross border contractor payments can take longer to process than domestic payments, but some methods are faster than others. Using a DPP such as Payoneer can be quicker, and you’ll be able to check the transaction status throughout the process.
• Financial risk – international payments and transfers may be more vulnerable to the risk of fraud, hacking and identity theft, so consider the security implications of the method you choose.
• Limited transparency – global accounts payable processes involve more steps and more intermediaries, which makes status tracking more difficult. You might also find it more complex to predict fees and processing times due to additional processing partners and more regulatory requirements.

Your accounts payable best practices

When it comes to paying overseas contractors and getting paid by clients worldwide, the method you choose comes down to what’s best for your particular needs and circumstances.

Extend your business reach by using a payment service that isn’t reliant on Global ACH.

Look for an all-in-one ecommerce payment solution like Payoneer to simplify your global vendor payments. It offers local receiving accounts, multiple currency FX management and smart, secure business payments across 190+countries and territories.

If you need to make recurring or bulk international contractor payments, look for a DPP which can streamline your payment processes and offer better value for money on FX rates, with competitive pricing. Using a DPP such as Payoneer offers competitive pricing compared to many traditional methods.

Fintechs have revolutionized the speed of making international payments – take advantage of this to better manage your cashflow and keep your payees happy.

Using a system like Payoneer that provides status tracking will give you better transparency as to where your money is and when payments will land.