Wire transfers aren’t the best global bet for small businesses
Large organizations tend to be well-armed with lawyers, compliance officers, payment experts, treasurers and fintech.
This is not always the case for midsize businesses that are clawing their way up to unicorn status.
Simultaneously, the fastest, most impactful way to grow is to go global, specifically to capture as much of an international footprint as possible. Again, for the non-Fortune 500, this can be tricky. Here is how you set up your organization’s B2B payment operations to take on the world while still staying lean.
Levvel Research (formerly PayStream Advisors) indicates that 87% of businesses that make international payments used wire transfers. But wire transfers, while fast and reliable, are not always the best way to send funds abroad. A local bank transfer (global ACH, e-check, SEPA, etc.) can be just as reliable but can be one-tenth the transfer fee. Wire transfers also have much higher fraud risk than global ACH.
A staffer member who understands and can execute on varied payment methods isn’t always available. Additionally, putting on a treasury hat and deciding when the business needs a local bank account for currency purposes or when a managed currency strategy makes more sense can be critical, operationally speaking. It’s in this type of activity where payables automation can be more advantageous than working directly with a bank or hiring a team.
Partners, suppliers — whoever you’re paying comes with data, and you have a choice. You can hire staff that communicates with them to get that data and enter it into your system, or you can automate this process through self-service portals. The latter of these is lean. The former is saturated in risk and prone to error. Custody of bank account data is not something to take lightly, and the less you are involved the better. Plus, in a 24/7 business environment, giving partners and suppliers choice of payment methods and currency and access to their payment status delivers more value to them, means fielding fewer inquiries, and puts your organization in a position to be more responsive.
Companies with landlocked operations where they work only with U.S.-based suppliers don’t need to concern themselves as much with tax and regulatory rules. But those that do work with international entities need to identify payees to the IRS. W-8s are the series of different forms required for many of these individuals. W-8BEN, W-8BEN-E, W-8EXP, W-8IMY, W-8ECI, W-4 and Form 8233 are all used by the IRS to determine the business relationship with these suppliers. Likewise, sending funds abroad maybe be subject to scrutiny if they involve sanctioned countries or individuals. Knowing when it’s OK to pay someone and taking a proactive stance on compliance will reduce regulatory risk.