Companies in industries, such as retail, food & beverage, manufacturing, and software, are increasingly relying on international suppliers for goods and services. While global sourcing is often a sound business strategy, it can be challenging for AP teams to process and pay growing volumes of multi-currency invoices.
For starters, even if they’ve automated domestic AP processing, an AP team may have no choice but to manually process international invoices, which creates significant operational inefficiencies. In addition, many businesses have traditionally relied on banks to make FX payments, not realizing that international wire transfers often involve multiple intermediaries and hidden fees that drive up costs and processing times.
Key AP Automation Requirements to Efficiently Process and Pay International Invoices
A growing number of savvy AP departments are turning to solutions to alleviate the high costs and complexity of processing international invoices and executing FX payments. But not all products are created equal.
If you’re ready to join your forward-thinking peers, here are seven key considerations when choosing an AP Automation solution to manage your international AP:
- Automated invoice capture and approvals for international invoices. One of the biggest time-sinks of a manual AP process is keying invoice data into the system. Automated invoice capture capabilities automatically extract header and line-level information with a high degree of accuracy, reducing processing time by up to 80%. But for international invoices, the system must also be able to automatically capture the currency to make processing smoother. In addition, being able to automate the invoice approval process with people in different locations and time zones will drive tremendous efficiencies across your entire process.
- Support international tax capabilities. Canadian companies or U.S. companies with overseas offices or subsidiaries must pay international taxes, such as VAT, for their European and other international suppliers. To comply with tax regulations and avoid errors and penalties, make sure your AP automation solution can apply international tax codes at the invoice header or line-item level. Ideally, you can set and apply vendor defaults to save time. Moreover, tax codes should be sync from your ERP, so you only manage one version of the truth.
- Sync the exchange rate with your ERP. Instead of having to manually input the exchange rate into your ERP for payment, the solution should automatically sync this information back to the ERP system when it processes the payment. That not only saves you time, but also reduces the risk of error.
- Update FX rates continually to ensure the best prices. Because banks typically set daily rates for international wire transfers, they tend to mark up the exchange rate higher to mitigate the risk of intra-day currency fluctuation. With an automated payments solution that offers spot rates that are updated frequently throughout the day, you’re much more likely to get a favorable rate. It can make a big difference, especially with less common currencies, if your solution, for example, updates rates every minute, versus locking in a daily rate.
- In-country network of banks to keep your costs low and transactions fast. Some solutions more closely resemble typical banks which requires FX payments to go through multiple intermediaries or transaction points. The more banks that have a hand in your transaction, the greater the fees to you and your supplier. Look for a payment provider that has a network of in-country banks, so many of the transactions will be considered “domestic” payments and won’t incur fees. This type of network also speeds up the transactions.
- Seamless workflow with domestic payments. For ease-of-use, efficiency and greater visibility, it’s important to find a solution where domestic and international payments follow the same workflow, covering the entire invoice-to-pay cycle, from automated capture and approval – regardless of the currency – to coding and execution, including integrated FX payments. You could also find solutions that allow you to process domestic and international payments in the same payment run, yet, at the same time give you the flexibility to set up a different approval workflow for domestic and international payments.
By eliminating separate manual processes for international payments, you can have faster transfer and easy reconciliation of foreign exchange payments, and importantly, a consolidated view of AP for greater visibility into the business, including cash flow.
- Offer multiple payment options. Some payment service providers offer multiple payment methods, such as international ACH and wire payments. With this flexibility, they will issue your FX payments using the fastest method.
All these features enable greater visibility and control over your international AP and FX payments. They will enable you to easily manage your payments, with reduced effort and error – as well as substantially lower costs. That’s critical when you consider that the cost of international AP operations for SMBs is about $7 trillion each year, according to Medici Research. The effort and cost to capture, process, pay, and reconcile invoices received in different currencies using a patchwork of manual processes creates significant complexity, obstacles, and inefficiencies. And you’re left with longer cycles and reconciliation headaches along with higher costs.
Future-proof Your Business with International Invoice-to-Pay
There’s no doubt that the economy is becoming more global every day – impacting all sorts of businesses. Even if you don’t use international suppliers now, there’s a good chance that you may turn to them in the future. Because of that, when you choose an AP automation solution for your domestic accounts payable, it makes sense to ensure that you can also use the platform to process and pay your international invoices as your business expands. By considering your needs for international AP and FX payment today, you can future-proof your business for tomorrow.