Dealing with FX complexity is a roadblock to growth in international business. Most companies assume that invoicing in USD and leaving it to their international customers to figure out the payment does not impact the business relationship. They could not be more wrong.
70% of companies buying from international vendors have stopped doing business with them because of a cross-border B2B payment experience, according to 460+ AP professionals from Latin America, the Middle East, and Africa surveyed by Flywire. At best, international customers admit that they wait much longer to pay those invoices – more than 80% say they wait longer to pay a bill issued in another currency, and dealing with FX complexity delays the process.
When it is difficult for international customers to pay you, everything suffers.
Their perception of you and your products. The productivity and efficiency of your people. Your business’s nascent reputation as an internationally respected brand. Automating the process with an invoice-to-cash approach creates a flywheel effect – increasing customer satisfaction and ensuring more predictable cash flow.
Why manual invoicing slows down cross-border payments
Let’s say you are the controller for a mid-sized SaaS company based in the U.S. Leadership has decided to invest in operations to sell the software in Canada and Mexico. As is often the case, much of the conversation has advanced by the time it lands on your desk. Everything is “ready to go,” save the question of how you will invoice and collect payment from new international customers.
You, of course, foresee some issues:
- Timeliness and accuracy of payment. When customers are billed in USD and expected to figure out foreign exchange on their own, a few things typically occur:
- The payment is short. Confusion and lack of clarity over FX fees (the mid-market rate is rarely available to the typical consumer) often result in the payment being short of the full amount and needing to chase down the payment.
- The payment is late. Wire transfers take days and are affected by bank holidays and weekends, banking hours, and other factors that can delay the payment.
- Cash flow is difficult to forecast and predict. When there is little visibility into when cash is coming and if it will arrive in the correct amount, it is more challenging to forecast and determine a strategy for investment in the region.
- Ease of handling partial payments and discounting. Settlement speed can affect the timeliness of payment to meet terms and incentives, for instance, for early payment. When a wire transfer arrives, it must be manually matched to the open invoices to which it applies.
- Ensuring compliance with regulations and laws in different countries. There are many things to consider in the cross-border invoice-to-cash process—from the way an invoice needs to be delivered to whether there are legal requirements for it to be translated into local languages, ensuring the payment is secure, and much more.
- Impact of additional manual work on your team. With no new headcount, existing staff will now need to monitor incoming wire payments, match them to open invoices, answer customer questions about their invoices, and much more.
When invoicing is disconnected from the payment workflow, it causes problems for both the customer and the business. Ensuring a connected invoice-to-cash process—one in which payment options are embedded within the invoicing process and transaction information is integrated with the accounting system of record—makes a cross-border transaction as simple to execute as a domestic one.
How does automation speed up cross-border invoice-to-cash workflows?
According to 460+ AP professionals surveyed by Flywire from Latin America, the Middle East, and Africa, international customers of B2B vendors admit that they wait longer to pay their invoices if the process is complex.
- 82% have waited to pay a vendor because of FX complexity.
- 88% say dealing with bills in another currency has sometimes delayed payment to their vendors.
- 84% say the process takes much longer when there are no local options to pay.
The Invoice-to-Cash (I2C) cycle covers the accounts receivable (A/R) process between the initial creation of an invoice and when that debt is settled in the corresponding customer’s account within your financial records.
When that process is digitized and automated, everything flows more smoothly. Instead of a PDF attached to an email, customers, for instance, get a link to a secure portal. They see their account information, what they owe, when it is due, and clear payment options. They get automated reminders to pay if they are running too close to a payment deadline. And everything is highly secure.
Within that process, embedded payment functionality ensures customers see exactly what they owe—in their currency and, oftentimes, in their local language. They can choose their payment method—including credit card, bank transfer, digital wallet, local payment method, and more—and complete the transaction online. Your business receives payment in your currency of choice, and the technology automatically applies the amount to the open invoice. If there is an issue, the software surfaces exceptions and suggests solutions.
That leads to many benefits in terms of speed.
- Automated invoice creation. The software pulls information from your system of record for customer and transaction data and saves it for future transactions. Technology can ensure that invoicing information is available in their preferred language. This all improves speed and accuracy.
- Reduced short payments and time spent chasing them. Service disruptions for customers and time spent tracking down payments in full are minimized because customers see the full amount they owe in their local currency.
- Faster dispute resolution. Customers can contact someone in their time zone and in their local language if they have issues.
- Less time spent answering questions. Clients can solve issues oftentimes on their own because payment status is easy to identify for both parties – from initiated, guaranteed, and delivered.
- Reduced cost of intermediary bank fees. With competitive FX rates and fees, money is available to reinvest in other revenue-generating parts of the business.
- Reduced time spent matching incoming payments to open invoices. Technology automates the reconciliation process and surfaces exceptions for faster resolution of outliers and more time to spend on customer-facing activities.
What to look for in a cross-border invoice-to-cash solution
The right partner can make the cross-border invoice-to-cash process appear as seamless and straightforward as a domestic transaction. Here are some features and functionalities to look for in a cross-border invoice-to-cash provider.
Functionality to invoice in local language and currency. Don’t leave it to your international customers to figure out how to translate your invoices – regarding language and currency. Invoicing in USD to their local currency and leaving the burden on the customer to figure out the correct payment amount while considering FX rates and hidden transaction fees isn’t great customer service. It can frustrate customers and create a number of headaches for your finance team.
There are also many regional and local regulations and laws guiding what exactly your invoice must look like and how it has to be delivered. In some cases, it must be translated into the local language. You must also ensure the payer sends the correct documentation for U.S. tax purposes. Your cross-border payment solution should automate these things for you.
Support for local currency and payment methods. Customers are more likely to do business with a company that supports local payment methods, making it easy to pay their invoices, payments in local currency, and seamless cross-border payments.
Flexibility in payments + optionality in methods. Look for solutions that support and automate more complex processes – such as applying payments to multiple invoices or subscription models. Your clients will also want optionality in the actual payment method – with the ability to pay by wire transfer, card, digital wallet, and more – without you managing individual relationships and contracts.
A scalable, secure payment solution. Payment technology has advanced far beyond what many B2B companies rely on today. And outdated payment infrastructure brings risk on several levels– from payment security to eroding customer trust and loyalty. Laws, regulations, and standards differ by country, and ensuring your company is compliant requires a partner with a global footprint and deep in-country expertise. Key certification and standards to ensure compliance include:
- SOC 2 Type 2
- PCI DSS v. 4.0
- ADA
- GDPR
- California Consumer Protection Act
- PIPEDA (Personal Information Protection & Electronic Documents Act in Canada)
- HIPAA
Ensure low levels of friction while reducing fraud. Facilitating the movement of money across borders and in highly regulated industries is complex and takes both longevity in the industry and deep roots. Ensure your partner has a dedicated compliance and risk management function overseen by our Compliance Officer and Chief Information Security Officer with board-level oversight. This includes robust processes for:
- Adherence to Know-Your-Customer (KYC) procedures
- Adherence to Anti-Money Laundering (AML) policies
- Filing suspicious activity reports (SARs)
Managing chargebacks and disputes. Ensure that the provider has a proven process in place for when a customer has a payment issue and that they will manage this end-to-end to achieve the best outcome for the business.
Support in local languages and time zones. When your clients have a question, they should get it answered in their local time zone and, ideally, in the language they are most comfortable writing and speaking in. Ensure your provider has an in-country presence in your biggest hubs and can support global customer needs around the clock.
Competitive, clear fee structures. Transparency is an essential part of strong customer relationships. Payers should be able to see fee structures at the time of payment and count on the most competitive rates. This will ensure they are making a payment in full at the point of transaction and minimize disruptions due to short payments that result from FX fees.
Practical AI functionality. AI-enabled invoice-to-cash automates the most manual parts of the process – such as matching incoming payments to open invoices, including partial payments and payments that may apply to different invoices. It also surfaces exceptions – such as overpayments and payments missing key details, to ensure higher accuracy and speed.
Integration with systems of record. An invoice-to-cash solution should pull information from and feed it back into the system of record for accuracy, ease, and the highest efficiency from automation. Look for systems with APIs that make it simple to pull information from the system of record in a secure way.
Steps to automate your cross-border invoice-to-cash process
Streamlining the invoice-to-cash process has real, tangible business value. Customers are happier, and the money and time saved are reinvested. This drives loyalty and growth.
But where do you start?
Step 1: Define the business need and bring in the right stakeholders. What will be the impact of an improved invoice-to-cash process? Document the current process and the reasons it will not scale. Ensure the people who work on it have a voice in how the process could be improved.
Step 2: Ensure data quality within the system of record. Do not automate a flawed process. Putting in the work to ensure that the process – everything from the checks in place for approvers through invoice terms and customer preferences for delivery and payment – is a good step toward ensuring that an automated process delivers greater efficiency.
Step 3: Research and learn. Consult peers, industry research, vendor websites, and resources. Pay particular attention to real metrics and testimonials. Ask questions about the vendor’s capabilities and longevity in managing complex, high-value cross-border payments, security practices, compliance functions, global and in-country presence, and more.
Step 4: Make sure they can handle your volume of transactions and support the payment methods needed. Global scale is important when picking an invoice-to-cash provider. Do not get into a situation where, in a year, when payment volumes increase, they can no longer handle your business—and you find yourself managing multiple providers for different scenarios.
Ready to get started with a cross-border invoice-to-cash solution?
Flywire automates the cross-border invoice-to-cash process, bolting in payment capabilities that make sending and receiving a cross-border payment appear as simple as a domestic one. Flywire helps businesses grow internationally by:
- Digitizing and automating international invoicing with support for local languages.
- Equipping them with best-in-class A/R automation functionality – including dunning.
- Providing localized payment options for customers in more than 140+ currencies across 200 jurisdictions, including credit card, local bank transfers, and alternative payment methods.
- Minimizing banking fees and receiving competitive rates.
- Alleviating the hassle of late and short payments and automating reconciliation.
- Providing a better customer experience that drives loyalty.
Find out more about Flywire’s Invoice-to-Cash solution for B2B
Knowing that there’s a solution for cross-border receivables makes it more exciting for us to grow.
