Businesses making foreign supplier payments will frequently be paying in USD. The United States is an obvious destinations of suppliers for lots of businesses, but many suppliers in Asia will also request payment in USD. It’s the most widely accepted currency in the world.

Businesses making international supplier payments should be looking for a fast, cheap and secure options outside their bank.

The best way to pay a supplier in USD

Operating with foreign suppliers means you are conducting international payments which can lead to poor exchange rates and high fees. So here’s what to look for when paying a supplier in the US or around the world in USD.

Pay your supplier invoice in USD using a money transfer business like WorldFirst.

  1. Get the best possible exchange rate. Banks charge a margin as high as 5.3%, meaning your customer exchange rate will be poor resulting in a more expensive invoice. WorldFirst’s margin is 0.60% or less which means market-leading exchange rates and cost savings for your business.
  2. Beware of fixed fees that sit alongside a margin. WorldFirst charges no fee on cross-currency transfers of AUD $10,000 or more.
  3. Speed of transfer. A slow supplier payment can have operational implications on your business. WorldFirst can make same-day payments for USD supplier payments.
  4. Service. Look for options with a dedicated account manager and the ability to make online transfers.
  5. Lock in an exchange rate. Forward contracts allow you to lock in an exchange rate for up to two years. If you know how much a future supplier payment will be, and you like today’s rate, you can provide a deposit and lock in that rate.

 

The cost of an AUD USD transfer with WorldFirst vs the banks:

Fluctuations in USD can impact the cost of your foreign supplier payments

Currency markets are very unpredictable, but here are some events that may impact USD volatility which can lead to your supplier invoices costing more or less.

  • Interest Rates. In short, if interest rates increase generally the economy is performing well and the currency may strengthen. Interest rates decreasing means the Federal Reserve (The US Central Bank) wants consumers spending more to boost the economy. Notes from the Federals Reserve meeting can also influence forecasts and volatility along with any commentary from individual Fed Speakers.
  • Political stability. In more recent times, market participants are more interested in what politicians have to say instead of what the data has to say. We call this political influence as opposed to the more conventional method known as structural influence. Yes, President Trump’s comments do matter.
  • Economic data releases.  Data releases aim to assess the strength of an economy and will usually come with a forecast. When the release is compared to the forecast, the market reacts. If the ‘actual’ comes in worse than the forecast, the currency tends to fall. Some key releases include Gross Domestic Product (GDP), Nonfarm Payrolls, Retail Sales and Industrial Production and Trade Balance. To name a few.

On the flip side, what’s happening in your local market can also provide strength or weakness to the currency you hold or are selling. Remember, there’s two sides to every price. For example, the strength of the Chinese economy can impact demand for Iron Ore, the key component of steel which Australia produces. Less demand means less Australian Dollars being purchased, therefore a weaker currency. In New Zealand demand for milk powder can influence the NZD.

Start saving on your USD supplier payments with WorldFirst

Sign up for a free account with WorldFirst where you can enjoy money transfers up to 8x cheaper than the banks, low fees and award winning local service.

worldfirst.com.au 

 

 

These comments are the views and opinions of the author and should not be construed as advice. You should act using your own information and judgement.
Whilst information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed.
All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice. 
Please consider FX derivatives are high risk, provide volatile returns and do not guarantee profits.