Your Partner for Bookkeeping and Controller Services

Contact Us

What are you interested in learning more about?

×

Supporting Strategies Blog

Bookkeeping Services Tip: Using Forex for International Payments

Share:

Bookkeeping Services Tip: Using Forex for International Payments

|

christi-todd-for-web-square.jpgAt one point during my career as an accounting professional I provided bookkeeping services for the U.S. Sales offices of a multinational company. We regularly had to make payments to foreign vendors.

Initially, we made these payments as international wires out of our primary U.S. business account. After currency brokers began calling me to say that they could save me money on these transactions, I researched the options and began to make payments through the Forex market. 

Today, the need to make payments internationally is increasingly common to businesses large and small, and savvy bookkeeping services professionals are recommending Forex as a good, cost-effective way to handle these transactions.

Forex (Foreign Exchange) refers to a decentralized global exchange market for the selling and purchasing of currencies. The fees tend to be cheaper than those offered by banks or online money transferring services. Currencies sell in pairs: for example, U.S. Dollars to Euros. If a U.S. business is making payments to a vendor in Europe, the Forex broker will accept U.S. dollars from the U.S. business and then purchase a quantity of Euros to pay the vendor on behalf of the U.S. business in Euros.

There are several advantages to using Forex, in addition to the lower fees it offers. Forex generally does not require U.S. businesses to maintain a balance in the Forex account—instead, payment is made only upon initiating a transaction. You can also manage your costs by using a Limit Order, which is an order placed with your brokerage to be completed only when currency can be exchanged at a specified rate.

Even if your business rarely makes international transactions, you may find Forex to be useful. Your broker can make “spot payments,” which are for immediate, non-recurring payments to foreign countries. You’ll get competitive rates and won’t necessarily have to pay an additional bank transaction fee. 

There are many brokers out there and it can be daunting to find the right one. I recommend to my clients that they compare prices at FXCompared.com, which I find to be a great resource. You can enter in the details of your transaction and compare your quote to the exchange rates of four other Forex providers, as well as to current bank rates. 

As our world becomes increasingly global and mobile, the number of businesses in need of international payment solutions has skyrocketed. Talk to your bookkeeping services provider about your needs when it comes to international transactions. Your bookkeeper should be able to recommend a broker and help you get started.

Contact Us

Christi Todd

Author:

Christi Todd

Legal and Tax Disclaimer

This website is created by Supporting Strategies to provide general bookkeeping and accounting information only. Supporting Strategies does not provide tax, legal or accounting advice, and the information contained herein is not intended to do so. As such, the information provided should not be used as a substitute for consultation with professional tax, legal, and accounting advisors, and you should consult with a tax, legal and accounting professional before engaging in any transaction.