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When dealing with global suppliers, is it easier to pay them in their local currency or U.S. dollars? There may be no pat answer that applies to every country. In fact, many countries tie their currency value directly to the U.S. dollar, which can add stability to local exchange rates and speed up transactions.
On the other hand, there are a number of advantages to paying your foreign vendors in their local currency. For example:
When you pay your foreign client in U.S. dollars, that money needs to be converted. That conversion takes place at the local bank, and everyone between you and the vendor takes their cut in transaction fees.
Then there are those irritating hidden fees, which everyone hates. In addition to the normal processing charges, there could be a conversion charge—and you can count on an exchange rate that will favor the bank.
When the third-party institution converts the U.S. dollars, you are also looking at transaction delays and fielding impatient complaints. Paying in the local currency upfront can keep your business flowing on a reliable, even keel, keeping your suppliers happy with a faster cash flow.
Speaking of conversion rates, paying in U.S. dollars involves dealing with the volatility of exchange rates. From the time you are billed until the payment lands in the foreign bank account, the conversion rate differences could well eat into your profits.
As one safeguard against fluctuating currency exchange rates, your vendors, who also want to protect their profits, might pad their price quotes. That padding, of course, is in the vendor’s favor, so you’re paying more for your overseas products. Pay in local currency, and both you and the vendor know the exact price.
Then there are those inevitable Accounting errors that take time to correct. With cross-border payments, correcting billing and payment errors can be time-consuming and costly. Sure, mistakes happen, but when correcting those mistakes includes complicated currency conversion—well, you get the picture.
Pay in foreign currency, and you can deal with problems without the additional headache of currency conversion. It’s a matter of simplifying reconciliation. If the mistake or dispute with a British vendor involves £10000 it’s simpler to just deal in pounds sterling rather than $13200, which one month ago could have been at an increased exchange rate of $13400.
Your suppliers receive the funds faster. Using MTFX accelerates the process further with quick turnarounds, reducing the involvement of foreign financial institutions, and guarantees the best available currency exchange rate.
With MTFX, as a business customer, you can send payments directly to your overseas vendors in the local currency with a secure online platform where you can send money worldwide in over 50 currencies to over 200 countries.
MTFX guarantees bank-beating exchange rates that are lower than banks. Its benefits for your business include:
Open an account with MTFX today in just a few minutes and enjoy competitive exchange rates, low transfer fees, and easy transfers, when sending money anywhere in the world.
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