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Bank wire transfers have remained the most popular way for businesses to pay overseas suppliers because they are available at nearly every bank worldwide. But this doesn’t necessarily make them the best option for your specific situation.
If your business is looking for ways to save money and strengthen controls when paying international vendors and suppliers, broaden your global payment options beyond wire transfers. For very large transactions and banks generating wire transfer revenues, wire transfers might be the right solution. But for smaller transactions, you can choose lower-cost business payment options.
This guide will help you find the best way to pay overseas suppliers and vendors.
Determine the Currency of Payment
Before you start conducting business with an international supplier, document in a purchase order or other contract which payment currency will be used in the transaction.
Perhaps your company policy is to only pay in US dollars (USD). But if you have flexibility, ask the selected supplier which currency they prefer. It may be a local currency, the US dollar, or the currency of another major country.
Also, negotiate who will pay the foreign exchange fee and the transaction fees for payments. You may be able to shift some fees to the payee rather than have your company pay.
Factors to Consider Before Paying International Vendors
Your finance team must understand how to pay international vendors to avoid mistakes, delays, and unnecessary costs, while also meeting the unique needs of your suppliers.
8 factors to consider before paying international vendors are:
- Availability of a payment method in a recipient’s country
- Choice of currency
- Whether to establish forward contracts for foreign currency transactions
- Whether a letter of credit or documentary collection is being used for the international transaction
- Payment method costs
- Riskiness
- Payer and payee preferred payment methods
- Timeliness of receiving the payment
With wide currency fluctuations in an international market, businesses may decide to enter into forward contracts to lock in a currency price when payment to the supplier is due.
A letter of credit or documentary collections may relate to the supplier transaction. The supplier may issue pro forma international invoices for this purpose. Be sure to pay only the actual invoice for these transactions, not duplicate payments.
These eight factors relating to paying overseas vendors and suppliers are explained for each payment method discussed in this guide.
How to Avoid Delays in International Supplier Payments
Other factors to consider when paying overseas suppliers include implications and common reasons for international business payment delays, and solutions to ensure your suppliers receive payments on time.
Delayed Payment Implications
Payment delays to vendors may result in shipment cut-offs until the supplier receives full payment of their past-due invoices. These shipment cutoffs can cause production delays for manufacturers or stockouts for retailers and e-commerce companies. Late and inaccurate payments worsen supplier relationships.
Common Causes of International Payment Delays
The most common causes of payment delays are:
- Manual data entry errors
- Slow traditional banking networks
- Complex regulatory and compliance requirements
Manual Data Entry Errors
Using standalone ERP or accounting software systems often results in manual data entry errors. These errors may result in incorrect payment amounts or bank account numbers, leading to shortfall discrepancies, misdirected payments, and delays in suppliers’ receipt of payments.
Using manual systems can also delay the accounting close for financial reporting, as reconciliations take longer.
Slow Traditional Banking Networks
When making cross-border payments to international suppliers, a traditional banking network is slow. Costly international wire transfers can take five days or more to reach the vendor. In traditional banking networks, wire transfers may involve intermediaries, slowing the process.
Global Regulatory Compliance
Payments must comply with regulations in both the sending and receiving countries to avoid fines and possible criminal penalties. For example, the United States requires that payment recipients be screened against OFAC sanctions and other blacklists. Payments must comply with AML (anti-money laundering) and KYC (Know Your Customer) requirements.
Another aspect of global regulatory compliance is adherence to local banking regulations in each country.
Solutions for Making International Payments to Suppliers
Finance teams paying overseas suppliers should apply these best practices to prevent late payments, manage costs and FX risk, and gain compliance:
- Optimize payment rails and payment methods
- Standardize and automate payment data entry
- Plan around global payment logistics
- Manage regulatory and FX risk
Optimize Payment Rails and Methods
Select an add-on accounts payable system with payment rails and methods that reach all of your suppliers’ countries. To improve supplier relationships, offer them a choice of available payment methods upon onboarding. The system should enable you to make payments in multiple currencies and via different payment methods in a single, large, efficient batch.
Standardize and Automate Payment Data Entry
An AP automation platform that integrates with your ERP or accounting software enables standardized payment data entry, including automated coding and error checking for accuracy.
Plan Around Global Payment Logistics
When scheduling global supplier payments, understand how long it takes for payments to reach suppliers in their countries. Use efficient and cost-effective payment methods. Schedule your company’s payments early enough to ensure timely receipt by your vendors.
Manage Regulatory and FX Risk
Automating global regulatory compliance improves compliance and reduces penalty risk by incorporating built-in regulatory compliance rules and blacklist screening capabilities.
Your company may reduce its FX (foreign currency) risk by hedging accounts payable to lock in the amount due between the invoice date and payment date. Seek a solution that offers competitive, built-in live foreign currency exchange rates.
Top AP automation software, with optional advanced currency solutions, offers centralized payments for all subsidiaries without requiring the establishment of an international regional banking network. It also offers optional FX hedging software for accounts payable.
Eliminate Payment Delays and Deliver a Stronger Global Supplier Experience
Late payments don’t just slow operations—they damage supplier trust and disrupt growth. Learn how leading finance teams streamline international business payments, reduce errors, and ensure on-time delivery across borders.
How to Pay Overseas Suppliers
Your business has choices in how to pay international suppliers.
Seven different ways to pay overseas suppliers are:
- Global ACH or international ACH transfer
- International wire transfer
- PayPal
- Credit card (including virtual card)
- Peer-to-peer payments
- Paper checks
1) Global ACH or International ACH Transfer
In the U.S., ACH bank-to-bank transfers through the Automated Clearing House Network system for member financial institutions are primarily limited to domestic-only payments within the United States. Nacha regulates the ACH Network. However, Nacha also has rules for and manages cross-border payments similar to U.S. ACH payments called international ACH transfers or global ACH. Global ACH is one type of international EFT.
For these international ACH transfer payments, foreign agencies outside the U.S. jurisdiction participate. For an international ACH transfer, a direct deposit is made into a cross-border bank account, which is cleared through the country’s clearing mechanism and may involve intermediary banks. Intermediary banks facilitate transactions between the payer’s bank and the payee’s bank, which may be a local bank offering a local currency account.
In Europe, for example, 35 member countries use the SEPA (Single Euro Payments Area) for bank-to-bank transfers in euros. SEPA participates in cross-border international ACH transfers with Nacha.
Global ACH is a low-cost payment method.
Not all countries participate in global ACH/international ACH transfers. Therefore, global ACH may not be available to your business for paying overseas suppliers.
2) International Wire Transfer
International wire transfers, sometimes called SWIFT payments, are electronic funds transfers (EFTs) processed through the SWIFT member network system, using secure messaging. Wire transfers are bank-to-bank transfers made by financial institutions through intermediary banks or third parties.
International wire transfers are used for cross-border payments in different countries. For cross-border payments, international wire transfers can take several days depending on the country, according to SWIFT.
If the recipient’s bank account is correct and bad actors haven’t hacked your bank account or tricked you into making a wire transfer through phishing schemes, then wire transfers are considered to be relatively safe.
The high fees for sending an international wire transfer range from $30 to $50, plus foreign exchange fees. Wire transfer fees are also charged by the recipient’s international bank and any intermediary banks. This pricing structure makes international wire transfers a costly payment method.
3) PayPal
Your business can choose PayPal to pay international suppliers. PayPal Business lets the recipient prepare an electronic invoice to request a PayPal payment. PayPal charges a percentage transaction fee that depends on the type of transfer or funding source.
The percentage fee for a transaction with a PayPal account to a PayPal account is 5% of the amount, with a minimum of $0.99 and a maximum of $4.99. If the funding source is a PayPal credit, credit card, or debit card, the transaction fee is 2.9% of the amount plus a fixed fee, depending on the currency. A foreign currency exchange fee of 4% (or a different percentage disclosed in the transaction) may also apply to the payment transaction if the sender converts funds at a foreign exchange rate before sending the payment to the recipient. Understand PayPal international transaction fees and how you can avoid them.
PayPal offers various payment services and can be classified as a peer-to-peer payment network.
4) Credit Card, including Virtual Card
Payers can use credit cards, including virtual cards with unique 16-digit numbers for each transaction. Virtual cards are tied to the credit card account. Virtual cards improve security by using different card numbers and sometimes offer rewards for transactions.
Some business account credit cards, including virtual cards, track business spend by employee. Spend controls give you more control over expenditures to protect the company’s bottom line.
5) Peer-to-Peer Payments
In peer-to-peer networks, payments are made between accounts. Digital eWallets may be used to hold fund balances and make money transfers. These money transfers are sometimes instantaneous, but may take up to 3 business days. Peer-to-peer payments are riskier because it may not be possible to recover the funds if the payment is sent to the wrong account or to a scammer.
Some examples of peer-to-peer payment apps are:
- Venmo and PayPal
- Square Cash
- Zelle
- Other specialized international money transfer apps
Some peer-to-peer payment platforms have low fees. Compare transaction fees and foreign exchange rates.
6) Paper Checks
Although your business may still issue paper checks to overseas suppliers, it’s an inefficient and risky payment method. When live paper checks are mailed internationally, they can take a long time to reach the recipient. They may be lost or stolen from the mail. Because the paper check shows the routing number and the bank account from which it was issued, it may be an unsafe payment method that encourages fraud.
Paper checks are a somewhat costly payment method because of the manual processing time compared to electronic payments.
What’s the Best Way to Pay International Suppliers?
The best way to pay international suppliers is to use flexible, efficient global payments and AP automation software from Tipalti, integrated with your ERP or accounting software. That’s because the Tipalti payment solution gives you a transaction-related choice of preferred payment methods for paying international suppliers.
Choice of Payment Methods
Mass payments and AP automation software for overseas payments support multiple payment methods across 200+ countries and 120 currencies. As an option, Tipalti offers advanced foreign exchange (FX) functionality to simplify payments. Tipalti automatically reconciles large-batch payments in real time.
Tipalti international payment methods, depending on country availability, include:
- Global ACH
- Wire transfer
- PayPal
- Tipalti virtual card (with rewards)
- Live paper check
For US domestic transactions, Tipalti also offers ACH payments.
Tipalti provides automation software for AP automation and mass payments to solve your international supplier payment needs. Tipalti software also handles payments to freelancers, royalty payments for books and music, and referral and influencer payments.
AP Automation for Electronic Invoice Processing
Tipalti AP automation software supports electronic invoice processing, approvals, and the management of international accounts payable. Tipalti is multi-entity and multi-language, with business units and consolidated views of payables.
Mass Payments Software
Tipalti mass payments platform lets you split or shift some transaction fees to payees, lowering your business costs. When you onboard suppliers with Tipalti AP automation software, payees securely enter their W-8 form data for tax compliance and payment information for an agreed choice of payment methods and currency. You’ll be ready to make the first payment when the accounts payable are due, according to the payment terms.
Tipalti Automation Software Advantages
You’ll gain other advantages by using Tipalti’s AP and global payments automation software, including significantly cutting payables costs and staff time by 80%, automatically gaining global regulatory compliance, and reducing fraud risks and errors. Tipalti improves enterprise risk management and cash flow. The time savings achieved reduce hiring needs. And the finance team can work on new projects to add business value.
Build a Scalable, On-Time Payment Strategy for Overseas Suppliers
Paying international vendors and suppliers is a nuanced process. Businesses can avoid picking only one method and currency for paying all of their overseas suppliers, vendors, or partners.
When your business handles international vendor payments well, it pays invoices on time, considers preferred, cost-effective payment methods, and currency choices that both the payer and the payee find agreeable.
Your business needs the right AP and mass payments automation tools from Tipalti to implement the best payment methods for overseas suppliers. Download our white paper, “How to Streamline Supplier Onboarding.”
