What are B2B cross border payments?
Cross border payments are payments made internationally. These cross border transactions have become increasingly common over the years due to the globalization of the market.
The global pandemic also created supply chain strains that required companies to expand the reach of their partnerships with suppliers and vendors.
It is now quite common to find companies that must increasingly rely on business-to-business (B2B) cross border relationships to keep their processes running smoothly.
Having a payment system that supports such international payments is crucial. Various payment options like virtual credit cards, electronic transfers through the Automated Clearing House (ACH), wire transfers, and electronic checks may be options within the payment system you select. These create an opportunity for expanded markets and better supplier and customer relations.
However, AP staff and business administrators will need some help when they choose to pursue international partnerships.
Let's dive into a discussion of how global payments work and some of the benefits and challenges of supporting global payments.
How do B2B cross border payments work?
B2B cross border payments involve several steps, and several intermediary steps may be
involved to make the transaction successful.
It begins with an invoice, just like domestic business payments do. Invoices may set out payment terms, schedules, discounts, and taxes. An added layer of complexity happens when multiple currencies are involved.
Front-end providers may act as payment gateways to handle international payments, but these can assess large fees to handle the payment.
Back-end networks that can optimize cross border payments and provide senders with more options and better efficiency may be the answer for some companies.
What do businesses have to consider when using international payments?
Consider some items that add complexity to international payments between business partners. While these things don't make cross border payments impossible, they may have caused some businesses to hesitate to expand into international markets.
Currency conversion and foreign exchange rates
Currencies constantly fluctuate concerning one another. It can be challenging to correctly convert one currency into another so that international partners are left feeling like their invoices have been fully addressed.
Intermediaries
Cross border payments often include intermediary organizations like banks involved in the movement of funds. This can easily add processing fees and delays in the transaction time.
Fees and regulations
Transaction compliance with security and privacy laws is an important consideration. Each country may have legal hoops to be jumped through to satisfy documentation and auditing standards.
Common challenges with B2B cross border payments
With complexity comes challenges. Business-to-business payments to partners
in other countries are no exception to this rule.
Here are five challenges common to cross border payments that every business may face as they break into international markets.
1
Exchange rates
Since currency exchange rates are in constant flux, it can be difficult to calculate the current forex (foreign exchange) accurately.
Some intermediary businesses attempt to simplify this exchange problem by using a daily rate higher than the current exchange rate to account for any daily fluctuations. This may cause payees to pay a higher rate than they otherwise would.
2
Regulations
Regulatory rules govern money transfers between countries, and these compliance standards may vary between countries or industries.
3
Taxes and fees
Due to their complexity, multiple banks and legal entities may have to be involved in a transactional process. Each one will assess its fees and can add significantly to the cost of doing business internationally.
4
Fraud
The exchange of money internationally is closely monitored. This helps prevent fraud or criminal activity, but it can also make it a challenge to conduct legitimate business.
5
Delays
Bottlenecks in invoicing and payment processes are compounded by the added complexity inherent in international payments, which may make it difficult for businesses to compete in other countries.
How does Medius solve these common challenges?
Medius addresses the challenges common to cross border B2B payments by harnessing the powerful Medius Payments solution.
The AP and payment automation solution ensures that domestic and global payments are sent on the same day while avoiding wire fees.
International payments are routed through a global network of local bank accounts with confirmation of payment receipt.
Straight Through Payments is a capability that allows payment batches to be built and executed directly from Medius. No ERP bank file uploads or middleware are required. Payments are routed through customers’ existing bank accounts, allowing them to retain control over their cash while streamlining disbursement.
The innovative methods found in Medius’ solution cut costs and save time by minimizing delays in the accounts payable process. Having an electronic invoice-to-pay process further speeds up the payment cycle by removing costly manual steps.
At the same time, a digital process allows for a more robust security stance where AP staff can work securely from any computer while maintaining a password-protected portal with individualized user access.
Medius Payments is natively built into the Medius AP workflow. Approval rules, fraud risk detection, and audit trails are embedded directly into the system. This reduces fraud exposure, improves visibility and enables fast, policy-aligned payments without the need for additional software or manual processes.
Learn more about how Medius is reinventing cross border payments with an eye on reduced risk.
What should businesses look for in a cross border payments company?
Choosing from many payment gateways and software packages supporting cross-border payments can be daunting. But there are definite things that any forward-looking company will want to check off their list of necessary features before committing to a payment solution.
Consider some requirements you should demand from any AP automation software before adopting it.
Every manual step in the AP process creates added work for staff and time to the payment cycle.
B2B cross border payments already have the potential for a longer invoice-to-pay delay because of their complexity.
Your software solution should reduce the number of automation exceptions requiring hands-on staff intervention to care for mundane steps that are best handled automatically.
Only some business partners will want to conduct transactions in the same way. Suppliers in other countries may have a preferred method of receiving payments, such as through wire transfers.
Or they may impose transactional requirements like receiving payments in their local currency.
Supporting these preferences will go a long way to improving relationships and presenting a stellar company reputation.
Compliance is an important topic when it comes to b2b international payments. Systems must be able to support legal and financial requirements to satisfy both countries involved.
Relying on manual processes in this regard allows for unnecessary errors or oversights to creep in and can also make regular audits of records a nightmare.
Paper processes could be faster and more resistant to problems. But any electronic system is vulnerable to cyber risks too.
Electronic accounts payable automation software must provide ready access to its system but do so safely.
Password protection and features like two-factor authentication and granularity in user access ensure that systems are kept as secure as possible while remaining user-friendly.
Businesses have legacy accounting systems like enterprise resource planning (ERP) software that contain much company data.
Introducing new software should not isolate this data. Rather, new software should fully integrate with existing systems to make business data visible to both.
This prevents multiple sources of conflicting data or the extra work of hand-entering data into many systems.
With robust integration, business data becomes real-time and actionable for making decisions affecting the company's future and bottom line.
Automation introduces the possibility of simplifying payments. For example, batch payments that group similar transactions into one payment can be automated, greatly reducing the time and effort expended by AP staff.
While such a practice may be labor-prohibitive when relying on manual payment processing methods, an automated digital system can organize batch payments that include cross border B2B partners.
This results in simplifying financial statements and better organizing the work AP departments must handle while giving a defined and scheduled timeline.
Why use Medius for a B2B cross border payment solution?
The reasons for adopting Medius as your B2B cross border payment solution partner are well-defined in the section above.
Features
Each of the necessary features of an AP automation solution can be found in the suite of Medius software modules.
Automation
All your supplier payments, including international and domestic, are managed through one automated process. This improves the clunky, manual processes that lead to errors and the introduction of risk.
Payment Methods
Multiple payment methods like virtual credit cards, ACH, wire transfers, and electronic checks are supported. Our system simplifies the complexities of currency exchange so that you can contract with international partners worry-free.
Security
Strong security is a key feature of every Medius product. While our online portals are accessible from anywhere, that convenience doesn’t come at the cost of safety.
Systems are password-protected and feature individualized user authorization settings so that AP staff and admins have the access they need and limitations from what they don’t.
Integration
Medius Connect is a powerful integration connector allowing Medius to integrate seamlessly into your ERP using pre-built connectors to popular third-party systems.
Other integrations can also be built through REST APIs to allow systems to work together and keep data flowing in real-time.
Payment Options
Medius Payments supports multiple payment methods including ACH, SEPA, BACS, CHAPS, BankGiro, wire, checks, and virtual cards. This breadth, combined with multi-currency and international capabilities, gives finance departments a consistent and compliant way to pay any supplier.
Want to learn more?
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