For global online merchants, having a strong relationship with foreign suppliers is a key component to maintaining smooth operations and keeping up with growth.
But fostering trust can be challenging at great distances, especially if there is a language barrier. There are several actions that online merchants can take to form a stronger bond with their suppliers. These include: regular and honest communication by phone or video conference, with an interpreter if necessary; standardizing your ordering process; having a payment contract; paying on time; and regularly reviewing your expectations to make your supplier is capable of handling them. Most importantly, merchants need a fast, reliable, and low-cost form of payment.
THE IMPORTANCE OF SWIFT AND RELIABLE PAYMENTS
When it comes to their business relationships, overseas suppliers are usually most concerned about getting paid. Just as a merchant’s operations can be slowed by delayed shipments, a supplier’s operations can be slowed by delayed payments. Choosing the correct payment option is the best way to guarantee a sustainable B2B relationship and maintain profitability.
TYPES OF PAYMENTS MADE TO OVERSEAS SUPPLIERS
Merchants may choose to make security deposits and installment payments to their overseas suppliers prior to making a final payment. Security deposits may be considered risky for the online seller but in a good B2B relationship they will give your supplier an incentive to comply with your arrangement in a timely manner. It’s important to make sure that your choice for sending a security deposit if quick and safe. Installment payments made throughout the manufacturing process at agreed-upon points of completion also less risky for foreign suppliers but is can help to ensure that the process moves forward without holdups. One consideration when choosing to make installments is that it will increase transaction costs. It is important to choose a payment provider that charges competitive rates on transactions.
WAYS TO PAY YOUR OVERSEAS SUPPLIERS
One of the most common forms of overseas payment is a bank wire. For an initial payment by a merchant to the foreign supplier there is a high degree of risk and there is little protection for merchants or any recourse should the transaction go awry. In addition to the lack of protection, bank transfers can be subject to delays (up to 5 business days or more), exorbitant fees, and high margins.
PayPal or credit card?
For small transactions that may require some short-term assurances PayPal or credit cards can be accepted forms of payment. Assuming the supplier chooses to accept PayPal by opening an account, this form of payment provides dispute resolution, secure technology and fraud and purchase protection. But PayPal charges relatively high percentages and fees, on top of any fees that your payment method may apply for a foreign transaction. PayPal may choose to limit your payment options if they decide the risk is too high. And if PayPal identifies a transaction as high-risk they will place a hold on your transaction and the delivery of your products may be delayed or even cancelled. Credit cards also charge high fees for foreign transactions and need to be paid from another account, which adds to those fees.
Some smaller businesses have started to engage in peer-to-peer foreign transfers. Peer-to-peer currency exchanges do support fast transfers and provide substantial savings over banks. However, the P2P currency exchange marketplace does not fully protect customers. Transfer companies tend to offer fewer currencies and usually offer little more than spot rates. Businesses requesting a target exchange rate upon depositing funds may have to wait for it and so their overseas suppliers could be waiting some time to get paid.
In order to maximize profits, international online merchants need to convert their foreign earnings to their local account at a low transaction rate and then pay their foreign suppliers at equally low rates.
With Payoneer, merchants can sell on Amazon, any other global ecommerce marketplace or site and receive payments into ‘collection accounts’ in any currency where they are selling.
Merchants can use their collection account balances to make local payments in that currency at no cost.
Merchants can pay suppliers for free in the markets where they have collection accounts and provide suppliers with a way to debit their account on a regular basis. With Payoneer, merchants can also avoid regulatory compliance headaches.
CONCLUSION – THE BEST WAY TO PAY OVERSEAS SUPPLIERS
For merchants paying their overseas suppliers, the best choice is a provider that can give you great rates, low-risk, seamless transactions, speed and peace of mind. Payoneer’s experts in international payments make sure your transactions meet the requirements of every country you send money to and their multi-lingual customer care team is available 24/7 to you and your suppliers.