Paying Suppliers in the USA – What You Need To Know

Payments 1 February 2022
Paying Suppliers in the USA – What You Need To Know

Paying international suppliers can make the most seasoned business owner sweat. But getting your payments across the pond - safely and simply - doesn't have to be difficult.

International business arrangements may not be anything new. But with evolving regulations, confusing processes, and more and more service providers appearing with the "best" deal, paying international suppliers can feel like more trouble than it's worth.

 

But the truth is, it doesn't have to be.

There are a number of reasons to build your understanding of paying suppliers in the USA. Here are two:

1) cost or confusion should never be a reason for your business to lose out; and

2) a slow-to-process payment should never be a reason to put the best supplier off.

So, with more and more businesses sourcing US-based suppliers, here's what you need to know about taking the leap across the pond.

 

The traditional route is often the scenic (and more expensive) route

First thing's first, let's talk basics: most banks will support making international payments, particularly those made to suppliers in the USA. In fact, in 2022, it's probably more common than uncommon for your high street branch to have the infrastructure in place.However, there are reasons this is called the 'traditional' route. Submitting payment through a bank - no matter how competitive - will typically be much drawn out, and much more costly.

If you've already given this a shot, you'll know the exchange rate may be marked up by 5%, 6%, or even 7% at a time, on top of the transfer fee you're already paying. The exchange rate won't stay stagnant for long and oversight isn't great - meaning once it's sent, you'll have to wait with bated breath to see if it's landed with your supplier.

 

So what other options are there?

1. International bank account

If you still want to keep the experience a bank offers you, opening a business account in the USA with a trusted name could be a viable option. This will help you make payments to suppliers easier and faster and will mean your supplier can handle things from their end through a local branch.

But if it sounds too idyllic, you're probably right. The due diligence for opening accounts from the UK to the USA (or anywhere else for that matter) is strict and can be extremely time-consuming and costly. What's more, a lot of banks require your business to keep a set amount in place which isn't always realistic, particularly if you're a growing venture.

 

2. Letter of credit

You'll be forgiven for thinking this is a term from a Dickens novel. A letter of credit - in short - is an agreement between your bank and your supplier's bank to pay the relevant amount when the correct compliance documentation has been exchanged. Non-refundable.

Not as gentleman's agreement as it sounds, the letter of credit is a safe and secure way of trading in the US, but the paperwork and legwork to keep it that way will mean one thing. You guessed it: costly.

 

3. Advance payment

A once-common and now dissipating practice, the advance payment option is still available to you for international suppliers and works through payments made prior to you receiving your goods, services, or products. You can make a payment when exchange rates are higher, getting you a better deal.

The obvious downside to this is what it says on the tin: once the payment is sent, it's incredibly challenging to get your funds back, and to an extent, you'll need to rely on an honor system. So this one might be for the established relationships - but even then, take care.

 

4. Payment service providers

Using a payment service provider could be the fastest, simplest path to getting your US-based suppliers paid. Approval processes are almost immediate, and with many providers offering fixed exchange rates, forecasting and protecting your business' bottom line is made simpler too.

Typically, the caveat most people state here is the likelihood of sudden freezes. But this is normally your service provider doing the security work for you. With increasingly secure platforms, anti-fraud technology, regulations and compliance, around-the-clock contact support, and more, your funds are safer than most. It also keeps your international payments in one place with the rest of your financial management.

Regardless of whether you're a fresh venture, a growing mid-sized business, or a company with 1000+ employees, paying suppliers in the USA is a must-learn, and will open your growth potential exponentially.

No one method will suit all businesses, and there is a wide range of options available to most UK companies looking to branch out overseas. So make sure you're assessing your needs against the pros and cons of each solution, and keep your financial forecasting and regulations central to any decision.

 

We can help

With the Safenetpay platform, you can make your stateside payments simple and secure. Pay in over 150 international currencies with competitive FX rates up to 4 times lower than most high street banks.

Plus, with our portal, you can gain 24/7 access to your finances, online or through the app. Meaning regardless of whether your supplier is EST, CEST, Pacific, or Mountain Time, you can catch them up on the status of their payment in real-time.

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