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Paying foreign suppliers in local currency offers many benefits in the global B2B world, and using a currency specialist is the key to unlocking these benefits.
As a global business, there are many benefits to paying suppliers in their own local currency rather than in your local currency. Perhaps you’re thinking, “Doesn’t this involve expensive and complex foreign exchange processes?”
The good news is that making payments in foreign currency can be as efficient and cost-effective as paying in Canadian dollars. Using specialist currency exchange services lets you take advantage of this beneficial payment method for international invoices. But first, let’s break down the benefits of paying overseas suppliers in their local currency.
There are hidden costs that come with failing to pay foreign beneficiaries in their currency. Your foreign supplier has to convert the payment to their local currency, which exposes them to currency risk and banking fees. Instead of absorbing the extra costs, your foreign supplier simply builds a buffer into their prices and invoices.
By paying in the international supplier’s local currency, you can avoid these additional costs that would otherwise be passed on to you. If you’re making regular payments to your supplier, your business can save money and reduce the cost of doing business internationally in the long run. In addition, you’ll have more leeway to negotiate purchase discounts and a win-win contractual agreement.
When you pay your trade partners directly in their local currency, you may also have the privilege of negotiating more flexible payment terms. Since foreign suppliers no longer face the hassle of currency conversions, they’ll be more likely to extend payment terms if you agree to pay in their local currency.
When paying international suppliers, it doesn’t have to be your way or the highway. You can show respect and consideration by asking whether the supplier is willing to be paid in their regional currency. Most foreign firms appreciate being given a choice, which engenders loyalty and goodwill, helping you improve relations with your trade partners.
By offering convenience to your international suppliers, you can arrive at a mutually beneficial purchase agreement. This positive interaction helps change the tenor of your relationship for the better. Ultimately, improving relations with your trade partners sharpens your competitive advantage in the global marketplace.
When Canadian importers pay an international invoice in foreign currency, they take on the currency risk instead of passing it on to the supplier. Fortunately, global businesses that have a solid strategy for hedging currency risk can still come out on top.
For instance, you can use a forward contract to arrange for scheduled and specified payments that only happen at a pre-agreed, locked-in rate. Another risk management instrument you can take advantage of is the market order which allows you to target a specific rate. The exchange only happens when the target rate is achieved. All this gives you better control over FX processes and lets you enjoy fixed settlement terms that don’t water down your profit margins.
When your company handles cross-border payments optimally, this could open up more investment opportunities. If you’re looking for ways to optimize your international payments, consider using a currency specialist like MTFX, which offers tailored global payment solutions. MTFX allows you to leverage multi-currency accounts to reduce currency risk exposure while strengthening your business expansion strategy.
Regardless of where your international business partners are located, you can transfer funds in foreign currency and optimize cash flow by maintaining a balance in multiple currencies.
The best way to pay foreign suppliers directly in their currency is through a specialist currency exchange service like MTFX. Here’s why:
Paying your international suppliers can be surprisingly easy.
Your MTFX business account unlocks many business benefits in the world of exchange. As a leading currency exchange specialist, you can rely on our;
Open an account with MTFX and start paying overseas suppliers in their local currency today.
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