Invoicing International Clients as an Agency - Best Practices
When one expands globally, it is a very fulfilling and exciting time for the business. However, this growth also presents its own set of challenges. Cross-border payments, invoicing, and getting international clients to pay on time can be a bit of a tedious task.
Invoicing is the concluding activity before the payment is received in the entire cycle of the trade. We often strategize on how to deliver the product and how to receive the payment but we tend to neglect this crucial invoicing step from our strategy. In fact, how one invoices another plays a great role in strengthening the business relationship and enhancing the customer experience.
There are a few best practices that can be followed when invoicing international clients.
Establishing the terms of sale
One should clarify and set down the terms of sale while the initial contract is being established with the international customer. These details include cost, amount, shipment delivery, mode of payment, foreign exchange rate, accepted currency, and date of payment. Once these expectations are set, clearing it will become easy for your agency to manage cash flow and lessen the risk.
Fix the ideal method to receive the cross-border payment
There are multiple ways to make international payments – escrow account, credit card, bank transfer, etc. You should evaluate the pros and cons of each type of payment method and accordingly determine the best one for your business. If you are looking for speed but don’t mind paying transaction fees to go for credit cards and if you are looking for security and convenience, choose an escrow provider like Tazapay. If you want cost-effectiveness, open a foreign bank account. Based on your business priority, select a payment method. Keep in mind the fees and currency when you decide this.
The following payment methods are options that can be evaluated:
Bank Transfer – In this form of payment, one wires the money to your account after you provide the details in the invoice. However, the shortcomings of this method are being charged the intermediary fees and undisclosed foreign exchange rates. The customer paying doesn’t end up accounting for them and the burden falls on you. If you have multiple and recurring international clients, reconciliation could become a bit of a tedious task.
Foreign bank account set up – If most of your international clients are from one country, this could be a viable option for you. It does not lead to the issue of any FX rates or fees associated with wire transfers. It also makes life easier for the client as it is a domestic payment option. But the drawback here is taking into account the time being spent setting up and managing these accounts. Also, eventually, the money will have to be transferred to your local account.
Credit card international payments - Though this method is ideal for B2C businesses and offers quick cash flow and ease and convenience of payments, it has a few downsides. Processing fees and foreign exchange fees are high, almost ranging from 3-5%. For high ticket items, this could significantly add to the total cost and the clients may go to a competitor if they get a better rate. There is also a fear of cyber theft, the charge being disputed, and chargebacks to the sellers.
Tazapay’s Escrow Payment- Escrow payment meaning is that the money is stored in an escrow account and only disbursed when the shipment is completed. The service provider and client can agree on transaction terms and choose an escrow service provider unanimously; the guarantee of whom is taken by recognized regulators of that country. For instance for Tazapay in Singapore, the Monetary Authority of Singapore (MAS) regulates its payment facilitator Rapyd. Tazapay or any escrow service provider will receive the money from the buyer and keep it until the seller fulfills the terms of the agreement, and then transfer it. Once proof that services have been rendered is furnished, then the payment is completed. Therefore, all the parties stay protected – the importer is protected against any canceled shipments & the seller is assured that the buyer has the ability and intent to make the payment. With Tazapay, there are no hidden fees and charges, everything is transparent and disclosed. We charge a 1.8% processing fee capped at a particular amount, thus proving beneficial for large value exports. At Tazapay, we offer a competitive exchange rate and even match it to the best rate being offered elsewhere.
Take international taxes into consideration
If you handle invoicing in-house, make sure to account for the international GST (sales tax on goods or services). Many aspects need to be considered while making this tax calculation such as if the business is providing a service or selling goods, are they selling to customers or businesses, etc. All these variables will determine the tax.
Evaluate the invoicing solution providers
Check the invoicing services and features before selecting an invoicing solutions provider. This enables easy invoicing through customizable templates across the world. Make sure the following features are included:
- Customized templates for professional invoices
- Real-time tracking of payments being made and payments pending so you have an overview of the overall payment status
- The ability to deal with multiple languages and multiple currencies so international clients have a personalized experience
- An automated platform is ideal for recurring invoices and setting payment reminders
- Compatibility with multiple payment gateways so customers can choose the payment method they prefer
- In-built regional regulations and tax law for easy international tax accounting
Other invoicing pointers to make a note of
- Keep the invoice simple so that everything is visible at the first glance to the client – navigation should be simplified
- The date and reference number should be made prominent on the invoice so they can be located whenever required for communication purposes
- Keep an amicable tone by addressing the person and the company. For a small client, it adds a personal touch and for a larger client they need the name of the person in the accounting department in case any information is required
- Appreciate them for their business as it adds a touch of personalization & can go a long way
- Each item should be clearly listed on the invoice – the transparency gives clarity to the client and builds trust
- To ensure everyone is on the same page, mention the total amount payable, due date, and payment terms
Invoicing is the last step between the delivery and payment to be received from the client and should be given its due.
Invoicing International Clients as an Agency - Best Practices
The pandemic has changed the way businesses interact financially giving way to a more digital route for B2B payment methods. Modes of B2B payments such as cash and cheques were going down and being replaced by other modes of payments such as credit cards, opening an escrow account, wire transfers, and other online modes of B2B payments. This digital trend is only growing by the day and appears to be staying on for a while. Having said that, the B2B payments landscape, especially internationally
When one expands globally, it is a very fulfilling and exciting time for the business. However, this growth also presents its own set of challenges. Cross-border payments, invoicing, and getting international clients to pay on time can be a bit of a tedious task. Invoicing is the concluding activity before the payment is received in the entire cycle of the trade. We often strategize on how to deliver the product and how to receive the payment but we tend to neglect this crucial invoicing step f