Using international money transfers to manage imports and exports
Finding the best exchange rate can provide a big boost to your bottom line.
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As we move deeper into the 21st century, the operations of Australian businesses are no longer bound by international borders. Whether you’re importing stock from overseas suppliers or exporting your products overseas, businesses are more closely connected with the rest of the globe than ever before.
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Thanks to fluctuating exchange rates and a range of other costs, managing imports and exports for your business can be an expensive process. But if you’re willing to shop around for the right international transfer provider when sending money overseas or back to Australia, you could find big savings for your business.
Using international money transfers for imports and exports
If you source contents or stock for your business from overseas you’ll need to find a cost-effective and efficient way to pay your suppliers. On the export side of things, you’ll also need to find an affordable way to convert any foreign currency you receive back into Australian Dollars (AUD).
This is when an international money transfer comes in, allowing you to convert your AUD into another global currency, or vice versa, so you can move money across international borders. However, finding the best exchange rate for your international transfers is crucial. If you settle for a lower rate on a large transaction it could make the difference of hundreds or thousands of dollars to your bottom line.
Finally, it’s important to be aware of any laws and regulations that may affect your business imports and exports, such as:
- Australian customs regulations regarding the items you can lawfully bring in and take out of Australia.
- Customs regulations in the country you’re exporting to or importing from.
- Any regulations surrounding the amount of money you send - for example, transfer providers are required to report transactions of $10,000 or more to the Australian Transaction Reports and Analysis Centre (AUSTRAC).
- Whether there are any trade sanctions imposed on the country with which you are doing business.
International money transfers and the cost of doing business
Like any financial service, international money transfers aren’t free. In fact, there are two costs you need to consider when sending money overseas:
- The exchange rate, which reflects the value of the Australian Dollar (AUD) relative to the local currency in the country you’re sending money to or from.
- The transfer fee, which could be a flat fee or a percentage of the transaction amount.
Exchange rates and transfer fees can substantially differ from one provider to the next, so comparing your options could potentially save you thousands of dollars.
How to send an international money transfer – should I use my bank?
Most businesses will have built up a solid business banking relationship with one or maybe two banks. If you hold your business loans, savings accounts and credit cards with one bank, asking them to take care of your international transfers is often the easiest option.
Unfortunately, banks are at the bottom of the pile when it comes to value for money on international transfers. The exchange rates offered are some of the lowest around, a long way below the mid-market rate while also charging higher transfer fees. If you choose your bank to send money overseas you’re most likely not getting the best value for your money.
But there are alternative options available for businesses looking to send money overseas to pay for imports and exports. Recent years have seen the rapid rise of a large number of dedicated online transfer companies. These international transfer specialists are concentrated on foreign exchange, rather than focusing on a wide range of products and services like banks.
With much tighter margins than the banks, online transfer companies can offer far superior exchange rates. Charging lower fees and in some cases waiving fees on large transfer amounts, shopping around to find a specialist transfer provider could save your business a whole lot of money.
Why you should compare transfer providers before choosing
Jack’s homewares business specialises in importing designer kitchen goods from a range of French companies. Jack usually sends the funds via wire transfer straight from his business bank account with a major Australian bank, but he’s realising the exchange rate his bank offers is always well below the mid-market rate.
Keen to cut costs wherever possible, Jack decides to compare his options and see if two online transfer companies can offer a better deal.
|Bank||Money transfer company A||Money transfer company B|
|Exchange rate||1 AUD = 0.6243 EUR||1 AUD = 0.6498 EUR||1 AUD = 0.6625 EUR|
|Amount of AUD required to send EUR€10,000||AUD$16,017.94||AUD$15,389.35||AUD$15,098.87|
|Money saved compared to bank||-||AUD$628.59||AUD$919.07|
As you can see, both transfer companies offer much better value for money than Jack’s bank. But if he chooses option B, Jack can save an extra AUD$919.07 when sending EUR€10,000 to his French supplier while also saving AUD$18 in transaction fees.
This example clearly shows the importance of finding the best exchange rate for your international transfer. By carrying out a quick online comparison you could find substantial savings for your business.
How to compare online money transfer companies
If you’re searching for the best money transfer company to help your business transfer funds overseas, make sure you take the following factors into account:
- Exchange rates. The higher the exchange rate, the better value for money from your transaction. Shop around for the provider that regularly offers the best exchange rates for currencies in which you need to transfer funds.
- Transaction fees. This is usually a flat charge but is sometimes calculated as a percentage of the transaction amount. It’s also worth looking out for providers who will waive their fees on large transfers.
- Personal support. Does the transfer provider assign a personal account manager for your business? This can help ensure that sensitive business details remain private and that assistance is on hand whenever you need it.
- Transfer time. How long does it take for the money you send to make it into your recipient’s account? Look for providers that offer fast transfer speeds to ensure you always pay your bills on time.
- Currencies available. In which currencies do you need to regularly send international payments? Does the provider offer support for all of those currencies?
- Recurring payments. If you need to make regular payments to an overseas supplier or regularly transfer money back to Australia, does the provider allow you to set up recurring payments? This is a convenient option that can save time by ensuring you don’t have to manually enter transfer details every time you send funds.
- Forward contracts. This allows you to lock in an exchange rate now for a transfer that will take place months or possibly years in advance and protects you against a falling exchange rate.
- Limit orders. Does the provider allows you to place limit orders? This means you specify the exchange rate you want and then let the transfer provider automatically execute your transaction when the rate you want becomes available.
- Customer support. Finally, check to see whether you can access phone, email and live chat support when you have a problem with your account. Some providers also offer online education centres to help you get more out of your account and minimise your currency risk exposure.
Once you’ve compared a range of transfer providers using the above factors you’ll be able to find an international transfer provider that offers excellent value for money for your business.
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