TREASURY MANAGEMENT
TREASURY MANAGEMENT SPOTLIGHT
When Paying in Foreign Currency Pays Off
While paying invoices with U . S . dollars may be an afterthought to some , doing so might leave you missing out on unique opportunities that can mean big savings .
PAYING IN U . S . DOLLARS may seem more convenient to a U . S . company , but that convenience comes at a cost .
“ There ’ s a common misconception that the preferred currency for international transactions is the U . S . dollar , but most American companies actually pay that way just because that ’ s the way they ’ ve always paid ,” says Greg Williams , Sterling National Bank Senior Product Director and Head of Payables .
“ We routinely ask clients which currency they use to pay international invoices . If the answer is USD , we strongly suggest that they have a conversation with their foreign suppliers about which currency they would prefer to receive .”
“ Every conversion has a cost ,” adds Ralph C . Aiello , Sterling Senior Vice President and Treasury Management Sales Manager . “ It ’ s better to pay in local currency through your U . S . bank , so you can control the conversion and get a better rate because you have a relationship with your financial institution .”
When deciding to use foreign / local currency or U . S . dollars for your international payables , consider the following areas where you may benefit :
Fee Structures
Often times , paying in U . S . dollars ( USD ) results in additional fees for conversion services . These fees may be explicitly communicated by the vendor up-front , or more commonly hidden in the cost of goods as markups assessed during negotiations . Paying in local currencies may allow you to bypass these fees entirely , which could result in substantial savings .
Exchange Rates
Exchange rates can vary slightly from bank to bank . While these variances may not seem significant on the surface , they can quickly add up — particularly over several large transactions . Furthermore , this variability can add a layer of unpredictability and inconsistency to your treasury management strategy . Choosing to pay in local currency eliminates these variables .
Workflow
Not every international vendor has a dedicated bank that can handle foreign exchange rates locally . This means that choosing to pay in USD may result in unexpected delays in fulfillment and other services while the vendor works to process your payments . Choosing to pay in a local currency streamlines the banking workflow for the vendor , and may even afford you some additional negotiating power on your deal by reducing or eliminating the lag time on cash flow . Over time , this can be a large boost to your cash flow .
To read more about Leveraging Foreign Currency Exchange to your full advantage , download our latest white paper at
snb . com / fx-whitepaper .
PAYING INTERNATIONAL SUPPLIERS
Companies paying international suppliers ’ in local currency receive average discounts of 1-2 percent , with some reporting discounts in excess of 10 percent . SOURCE : Aite Group
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