As Australian businesses expand their reach globally, foreign exchange plays a bigger role in daily operations. Business owners need to ensure they can easily pay invoices in multiple currencies and manage currency risk caused by volatile markets. If you have any interaction with international business, take a look at our guide on paying a foreign currency invoice.
How to pay an international invoice
1. Review the Invoice Currency
Understand the Agreement: The currency of the foreign invoice depends on your agreement with the supplier.
Assess Your Business Needs: Consider your business type and the supplier's country to determine if the invoice should be in the supplier's currency or in AUD.
Request Currency Options: If possible, ask for two invoices or a single invoice listing both currencies, giving you the choice of which currency to pay in.
2. Consider the Currency Risk
Evaluate Risk Implications: Be aware that invoicing in your domestic currency (AUD) transfers the exchange rate risk to the supplier, which might affect pricing.
3. Select a Payment Provider
Choose a Suitable Provider: Decide between a bank or an international money transfer company such as OFX or TorFX based on the invoice amount, frequency, and the required currency.
Registration with Provider: Register with your chosen provider, which is a standard requirement for most services.
4. Confirm Exchange Rate and Fees
Obtain a Quote: After registration, request a quote for the exchange rate from the provider.
Rate Confirmation: Ensure the provider confirms the exchange rate, so you know the exact cost in AUD.
5. Transfer the Payment
Initiate the Payment: Transfer the specified amount in the chosen currency to your provider.
Provider Processes Payment: The provider will forward the funds to the supplier's nominated bank account.
6. Payment Confirmation
Confirm Transaction: Ensure that the payment has been successfully processed and confirmed by the provider.
Keep Records: Maintain records of the transaction for your financial tracking and auditing purposes.
Features offered by international money transfer providers
When deciding on a provider to use, consider all the features of their service and the fees charged. It may be worthwhile to choose a provider with multiple branches or an online service platform so it is easy to pay foreign exchange invoices. Some of the features offered by these providers include:
Forward contracts
A forward transaction contract is an agreement between you and your chosen provider where they agree to sell to you foreign currency at a future fixed date and at a fixed rate of exchange. This can help your business with cash flow and can protect you against fluctuations in foreign currency rates. A forward exchange contract needs to involve the payer and the payee.
Foreign currency option
Foreign currency options offer different methods to limit foreign exchange risk. With FX options customers have the right to buy or sell foreign currency at a specified price within a set period (US option), or on a fixed date (European option). As an importer, you need to sell Australian dollars and pay a premium. This type of contract allows you to take advantage of favourable exchange rates. According to the Australian Bureau of Statistics, Australian-based businesses had a "net asset foreign currency balance sheet exposure of $2,389.9 billion" as of March 31 2022.
Online transfer
Many banks and international transfer providers have dedicated online platforms to assist you with international transfers. This is a quick and easy payment method that is easy to use and becoming popular for business.
SWIFT transfers
A SWIFT transfer refers to the Society for Worldwide Interbank Financial Telecommunication and uses a global interbank network. Many providers have built their services around this network. This option involves sending your funds to the provider who then immediately transfers it to the nominated bank account.
How to compare foreign exchange payment providers
Fees. Some providers will charge fees to use their payment service; however, there are many who provide their services for free. Certain providers only charge you a fee if you send over a certain amount of money so be sure to check the fine print.
Customer service. If there's one thing you want from an international payment provider it is peace of mind. International money transfers can be tricky and you don't want any mistakes which may hurt your business. Look for providers who offer over the phone or in-person services when facilitating your payment.
Convenience. When dealing with international business exchanges you want a service that is going to be convenient. Although not every provider is available 24 hours a day, they should provide 24 hour access to your account to monitor your payments.
Informative service. Services typically provide exchange rate alerts and access to live exchange data which may prove invaluable to your business.
Jeremy Cabral is the chief operating officer and global head of publishing for Finder. He has written hundreds of comparisons covering everything from credit cards to travel money to Netflix TV shows. Jeremy has a Bachelor of Business (Marketing) from the University of Western Sydney.
What are the best options for sending or receiving a large amount of money overseas? Read this $50,000 case study with exchange rates and fees comparison.
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I am new to importing and have just paid my first overseas invoice, yet the charges were astronomical, and I did not have piece of mind! What if I do not receive my goods? I am looking to import USD $3,000 every 5 weeks. What is the best and safest option? Thank you in advance
If you regularly deal in currencies, a multi-currency bank account can be a good option. Also known as a foreign currency account, they allow you to hold different currencies and convert them into AUD when you want. This means you can avoid short-term rate fluctuations from harming your balance.
Please feel free to read our guide on multi-currency accounts to learn more about how these accounts work.
Hi there,
Do HSBC offer the multi currency accounts for ad hoc payments for goods overseas? I need a provider that will allow me to hold US currency and make purchases online by transferring directly to their account. I am not a corporation but trying to establish a online business.
HSBC offers a personal and business multi currency account that allows you to hold USD. Please enquire about this directly to HSBC to see what type of account your online business is eligible for.
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I am new to importing and have just paid my first overseas invoice, yet the charges were astronomical, and I did not have piece of mind! What if I do not receive my goods? I am looking to import USD $3,000 every 5 weeks. What is the best and safest option? Thank you in advance
Hello Joe!
Thanks for the comment! :)
If you regularly deal in currencies, a multi-currency bank account can be a good option. Also known as a foreign currency account, they allow you to hold different currencies and convert them into AUD when you want. This means you can avoid short-term rate fluctuations from harming your balance.
Please feel free to read our guide on multi-currency accounts to learn more about how these accounts work.
Hope this helps.
Cheers,
Jonathan
Hi there,
Do HSBC offer the multi currency accounts for ad hoc payments for goods overseas? I need a provider that will allow me to hold US currency and make purchases online by transferring directly to their account. I am not a corporation but trying to establish a online business.
Thanks
Hi Rob,
Thanks for your comment.
HSBC offers a personal and business multi currency account that allows you to hold USD. Please enquire about this directly to HSBC to see what type of account your online business is eligible for.
Cheers,
Shirley