In the unwritten (and totally real) rule book of small business, saving money is near the top of the list . For small business owners, your resources may be limited, your funds might be tight, and your customer base small. So every penny you can save will help you continue to grow and expand.
The ways in which to save money vary from business venture to business venture. Perhaps you hire a smaller team, maybe keep your office at home, but whatever the way – you want to avoid any move that comes with hidden fees.
Since the explosion of the internet in the 1980s, business ventures have turned global. The internet brought virtually everything around the world to your fingertips and created more ways for businesses to save money.
In an increasingly connected world, there’s no need to limit your business to customers in the same geographical region.
How businesses can save overseas
There are numerous ways in which small and medium sized businesses (SMB) can save globally.
Firstly, hiring overseas contractors can help the SMB owner save money because it negates the need and added cost of a full-time employee. Contractors are quicker to hire, and there is no need to comply with local labor or employment laws. Benefits, vacation, and taxes are just a few costs that SMB owners save when they choose to outsource talent from abroad.
SMB’s also save on the global scale by buying and selling to suppliers abroad. Outsourcing supplies and labor abroad saves businesses significant amounts of money.
The financial truth
One thing that the small business owner may not account for when outsourcing labor and supplies are the hidden costs associated with your now international business payments. You have to pay for this global labor and supplies, and those costs can add up in the blink of an eye.
At first, it does seem like you’re saving money by hiring contractors over employees, but once you start to get into the nitty-gritty financials, you may be reaching further into your pocket when it comes time to pay.
In the end, international business payments can add up for both the sender and receiver. But where are these hidden costs coming from and how can you avoid them?
Why international business payments are so expensive
There are a lot of moving parts associated with an international business payment. How are you sending the money? How fast do you need the payment to travel? Were there any clerical issues? What currency are you sending the money in? Does it need to be exchanged?
Banks as an institution have utilized wire transfers to have a stronghold on international business payments since the invention of the SWIFT network in the 1970s. 80% of international wire transfers are handled by large banks. They were the fastest and cheapest method for individuals or businesses to send money across the globe.
Unfortunately, the technology and cost of wire transfers has not changed since the 70s and banks are still egregiously charging for these services. Banks can charge anywhere from $25-$65 per outgoing wire transfer. Charges will vary, and can be waived for certain “large” accounts. Once again, the small business owner gets buried under ridiculous fees.
Incoming wires also typically cost $10-$25. With wire transfers, both parties have to pay additional fees to send money and to accept money. That means your international partners will have to pay to receive their own money, which seems a bit ridiculous. Essentially, banks are capitalizing on their own complexity.
Utilizing payment networks like Veem can save you infinite amounts of money on your international business payments. Not only do you not have to deal with the banks, but our multi-rail technology means faster payments and less worry.
Much like the added costs same-day shipping means for the consumer, same-day payments create an additional fee for the small business. Quick send premiums that avoid the 3-5 day wait for payment processing add significant costs to your international payment. Here are some facts to explain this premium:
- According to Business Matters, banks usually use those business days to check the legitimacy of a transfer and protect their business against fraud and money laundering.
- The process of crediting funds from the source bank to the recipient bank may also take 24 hours to complete. Plus, banks use this time to “float” your money and gain as much interest as they can.
- Typically, you have to pay an extra 10% on top of the original amount that you’re about to send to move the money quickly.
With Veem, businesses don’t need to worry about when their payment will be received. Veem allows businesses to track their money from end-to-end. That means no more worries or questions regarding your hard-earned money.
Not to mention, Veem’s new Deposit to Debit feature allows U.S. users to receive money directly to their debit accounts. Instant payments? Yes please!
As with anything, a margin of error is to be expected. But with payments, this margin of error often comes with a price. If you are sending international business payments through the good ol’ wire system, one wrong number and your money can be sent far into the abyss (definitely not where you wanted it to go). By the time you realize your money is in the wrong place, it’s already gone. Plus, the fee for tracing bank wires can be as much as $50.
With our online platform, Veem makes it easy to ensure you’re putting in your information correctly. Round the clock customer service and two-factor authentication also ensures that your money is sent to the right place, free of charge.
The biggest hidden cost that comes attached to nearly every international business payment is foreign exchange rates. If you’re paying or getting paid through international relations, chances are you want to do it in your local currency.
Currency exchange rates are usually quoted against the U.S. dollar, pound sterling, euro or Swiss franc, as these are widely considered the most stable and widely used currencies for business transactions.
It's here: The Definitive Guide to Foreign Exchange for 2019.
From there, you need to know your mid-market rate, which is the midpoint between the buy and sell prices of two currencies. Your financial institution will then add a spread to your exchange, an undisclosed fee built into the foreign exchange rate you are given. These rates range from anywhere between 0.07-7% above mid-market rates.
These numbers are constantly fluctuating depending on how a nation’s economy is performing, thus affecting how much your exchange is going to cost you.
With this issue in mind, Veem has introduced Locked Exchange Rates to help protect small businesses from the roller coaster of exchange rates.
Veem introduces Locked Exchange Rates
With Veem’s new Locked Exchange Rates, small businesses no longer have to worry about fluctuating exchange rates increasing their costs and destabilizing their cash flow. This feature allows users to accurately predict their future expenses by securing their exchange rate with scheduled payments, saving them time and money.
For users, the exchange rate for future payments will remain the same for up to 92 days, allowing you to confidently manage cash flow. This protects businesses against the risk of more expensive payments due to unpredictable exchange rates.
See how Locked Exchange Rates can stabilize your cashflow. Learn more
Global payments can be a pain. Don’t even get us started on the wasted time, and how that affects SMB performance and wastes even more money. Business payments need a revolution, and Veem is leading the charge.