XE, in association with ACCA, looks at how technology is enabling global businesses to make complex international payments more efficiently
This article was first published in the May 2019 UK edition of Accounting and Business magazine.
In today’s highly connected global economy, companies are able to do business around the world at the click of an icon. They can source supplies from all corners, while flexible working patterns mean that they can have mobile employees with feet on the ground wherever they do business.
But securing the deal is one thing; paying for it is another. Clear processes need to be adopted so that the right supplier is paid in the right currency at the right time. Even if the company is dealing only with a handful of businesses in a small number of countries, the payment process can easily go wrong. Delays, inaccurate exchange rates and inaccurate account numbers can all add up to unpaid suppliers and employees, and additional charges.
Fortunately, technology can come to the rescue. Even in the past five years, the ability to make swift and accurate complex international payments has progressed immeasurably. For a finance function, the appropriate technology can reduce costs, release resources and manage reputational risks.
‘The challenges that most businesses and their finance functions face fall into two areas,’ says Thom Groot, European managing director at global currency data and international payment specialist XE. ‘The first is that the money gets there on time, which can be difficult if the business is making a payment outside the major currency corridors of pounds, dollars and euros. The second is that, depending on the number and variety of payments, such transactions can be a real time-sink and administrative burden.’
A further area of complexity is that exchange rates can fluctuate, and such swings can, as Groot points out, ‘be a bit of a headache’. The difficulty is exacerbated if the business is making multiple payments in multiple currencies. ‘Businesses don’t exist to solve these kinds of problem; they are in business to solve their customers’ problems,’ Groot says.
That said, any business with international operations can face a variety of administrative challenges. There will be the requirement to achieve global pay dates to avoid employee and supplier dissatisfaction. The business will want to avoid delayed or incorrect payments, which will involve added resource and cost. Even if the business is based solely in one country with purely domestic customers, it is possible that back-office functions, such as accounting and software, are based overseas. All need to be paid.
A technology-driven solution should be able to take control of the whole process. It could streamline a typically resource-heavy set of tasks, and in many instances remove complexity and introduce greater simplicity. Manual processes can be reduced or eliminated altogether, while the speed and accuracy of high-volume, time-sensitive payments should improve considerably. And for the finance function, technology can be utilised to create detailed reports to speed up reconciliation processes, while providing accurate real-time management information.
The level of technology required varies from one business to another and will logically depend on the volume and destination of payments. Payments volume can be from as little as a handful each month to many thousands. ‘There are a number of solutions available that will depend on the sophistication of the company and the complexity of their international payments,’ explains Groot.
It’s now very easy to carry out a single payment online, either through a bank or an international payment company. But if the business is making multiple complex payments, a number of different techniques can be used.
It could be as simple as uploading to an international payment platform a spreadsheet of the payments that need to be made on a particular time, day or week. For larger businesses looking for a more automated solution, software can now be integrated into a business’s own systems, often through an API (application programming interface). ‘The whole process between a business and the international payment company can become more integrated and more seamless; this is the way the world is moving,’ Groot says.
The ability to make such payments in an automated fashion has accelerated considerably in recent years, and it is a trend that is set to continue. ‘The most progressive companies were looking at this and talking about it five years ago, but now it is far more mainstream and seen as far less of a risk,’ says Groot. ‘Looking five years ahead, the adoption of APIs and integrated solutions around ERP platforms will become easier to implement, with larger businesses creating their own bespoke solutions. But it will also become much more accepted that SMEs can use this technology as well.’
Using this international payment technology can create a number of efficiencies and cost savings – from securing more favourable exchange rates to reducing the number of hours or days spent setting up the payments. The top five efficiencies are as follows:
- With a specialist international payment provider, you may get a more favourable exchange rate and lower transaction charges.
- Making payments at the right time can improve visibility of cashflow.
- By reducing the manual effort required to set up payments, you can save costs and reallocate resources.
- Reconciliation processes can be simplified.
- By automating the process, management reports can become easier and quicker to produce.
One final point: by automating the process and achieving greater integration of the international payment system, more steps are removed, which in turn will remove the risk of error, which has to be good news for finance functions.
Philip Smith, journalist
"Manual processes can be reduced or eliminated, while the speed and accuracy of high-volume, time-sensitive payments should improve considerably"