The Internet has erased geographic boundaries, allowing businesses to operate across city, state, and even country borders. B2B-based service providers and product suppliers are no longer limited to local clients. They can do business with customers on the other side of the world, with meetings held by phone or video chat and daily communication handled over instant messenger or email.
Even with all of these technological advancements, though, one area lags behind. The Internet has brought easy ways to pay clients online with nothing more than a credit card and a username and password. But one thing technology can’t help with is the complications associated with doing business with someone who is in another country, including fees, legalities, and transferring funds. Here are a few considerations for companies that conduct business internationally.
Know the Laws
Every new client relationship comes with a certain amount of risk, usually offset by a contractual work agreement. Unfortunately, when a business takes such a contract outside of America, it may not hold the same legal weight. If your client decides not to pay, you’ll need to make sure you have recourse. You can start by checking laws as they apply to your type of business contracts in that particular area of the world. However, you may need to have an attorney review the terminology in your document and make suggestions that will protect you if the customer doesn’t pay.
In addition to making sure your legalese will hold up in the remote country, you should also outline the terms of any dispute. This includes making sure US law is applied to the contract. If foreign law is applied, an American business may find it must follow the rules of the foreign country, which may mean higher fees and court costs than if it had been handled under American law.
Although many of the online payment services offer international payments, fees can vary dramatically. PayPal’s rates depend on a business’s monthly sales, butwill generally run 3.5 to 4 percent above the exchange rate, plus $0.30 per transaction. In addition to online payment services, you should also check with your bank on options such as wire transfers and bank drafts. Depending on the amount of money being transferred, these may be more affordable alternatives.
Before you agree on a rate for your project, first clarify the currency of the payment. Also research fees for transferring the funds and clarify who will pay those fees. If you’ve determined the cost ahead of time and added it into the proposal, it will already have been resolved before the project begins. If you’re accepting payments, clarify the easiest method for receiving funds and make your preferred payment method a part of the work agreement. If you prefer to have funds dropped into your PayPal account in US currency, stating this up front can save complications later, when you learn your client plans to pay a different way.
In addition to the language barriers that can sometimes get in the way of international dealings, converting currencies can be time consuming and confusing. There are currency converters online that helped automate the process, but they can be confusing. To see the dollar-for-dollar conversion, enter a “1” in the section for USD. If you already know the amount you plan to pay or request for a project, enter that dollar amount in the USD section to get the equivalent foreign amount. Since these rates can fluctuate, however, it’s important to round the amount up slightly to account for any increases.
You don’t have to be a financial guru to handle foreign currency exchanges. Your bank will likely help you craft a solution that works for your business, even advising you on currency rates for different areas. For businesses purchasing products and services overseas, often the cost is lower than in America, making it well worth any extra fees that are included as part of the funds transfer process.
Transacting business overseas can bring complications, but it also provides a wealth of opportunities. Entrepreneurs willing to work out the details can benefit from an increased customer base and more affordable products and services than can be found in America.