Payments to Foreign Vendors: How to Improve Transparency
May 13, 2021
In an increasingly globalized economy, more and more businesses will find themselves making payments to foreign vendors. They’re buying raw materials and products, or paying for a service they’re unable to generate in-house. Regardless, they’ll end up sending money across borders and around the world on a regular basis, to compensate these partners. The question is: how can you do it with total transparency?
Unfortunately, the traditional SWIFT system doesn’t offer a lot of transparency. Payments move from bank to bank without any visibility, and the only way to confirm a payment is to wait for it to show up in a foreign account. And while payment methods like wire transfers offer a greater degree of reliability due to their instantaneous nature, they’re too expensive to rely on regularly.
It all boils down to creating transparency with minimal cost and runaround. Here’s how to approach the question of transparency if you’re dealing with an increasing number of foreign vendors and global partners.
Vet your vendors carefully
The simplest way to bring better transparency to your global payments is to vet vendors. Know who you’re doing business with! While there’s huge convenience in being able to hop online and find a contractor or supplier halfway around the world, there’s a level of due diligence that comes with vetting them.
Look for basic criteria in a trustworthy partner. Do you have a real person as your point of contact? Is there a business or home address? What channel did you find them through? A site like Freelancer.com? Referral from another trusted partner? Ask a few basic questions to protect yourself and your funds from scammers or companies that may not operate on the level.
Once you’re certain you’re partnered with a reputable vendor or partner, there’s a greater degree of confidence that comes with paying them.
Maintain good payment records
Any business administrator knows that the secret to transparency is good record keeping. You should be able to open your books and easily find a paper trail for every transaction you make—especially recurring payments to the same entity. Keep track of these records with extreme precision.
Good recordkeeping isn’t only about protecting yourself from audit. It’s also good business practice for transparency in other facets of operation. How much should you budget for freelancers this month? If you keep good records, you can look at global payments over the last several months to get an idea. Likewise, if you’re trying to anticipate the going rate of a quality freelancer from Bangladesh, you might look at the two you pay regularly to get an average.
Maintaining good payment records is good practice in general. When it comes to tracking global payments, your records are the gateway to understanding who, what, why, when, and where you’re paying people.
Capitalize on digital payment traceability
One of the biggest holes in the current SWIFT infrastructure is the obfuscation of payments between banking instructions. You can see when the money leaves your account and the recipient can confirm when it lands, but between those two points, it’s anyone’s guess. Digital payments offer a better way of tracking payments.
Moving money through a digital payment provider like Veem offers payment tracking: a real-time look at where funds are in the process of a transfer. It brings transparency to both sides of the transaction: payers get confirmation of release and acceptance, and payees can confirm their payments instead of waiting on them to show up. When it comes to cross-border payments, this is increasingly important. Transactions that take days can cause friction without some way to confirm where the money is.
Avoid payment complications
Almost as simple as keeping good records of payment is taking steps to avoid payment errors. Chargebacks, recalled funds, partial payments and more all complicate the paper trail. Factor in currency exchange rates—which are constantly in flux—and it’s a recipe for mistakes that add up on the balance sheet. Not only will companies pay more to fix payment errors, contractors, vendors and partners can lose faith in companies that can’t seem to get their payments right.
Best practice for avoiding payment complications? Check, double-check and pay attention to invoices, funds being released and any other nuances in the payment process. All it takes is a misplaced decimal point or a 4 that looks like a 9 to snowball additional transactions.
Create transparency with every payment
Transparency is increasingly the most important variable in payments to foreign vendors. Knowing where your money is at any given time and that it’s handled accordingly equates to peace of mind. More important, it results in better relationships with vendors and partners, no matter where they’re located.
The answer to the question of payment transparency is digital payments. Using Veem to track funds while they’re in-transit and having the ability to monitor payment status is invaluable—for both companies and the partners they’re working with.