When you decide to expand a franchise internationally, there are many things to consider for each location. In all of the due diligence in expanding to new markets, how to get money out in the most efficient and effective way is often overlooked.
As you consider expanding a franchise to new locations overseas, how will you invoice international franchisees? Have you considered the implications of not invoicing in a local currency? Or the unique, local requirements that different countries and regions can have for invoice format, language and more? Will you invoice in your local currency and place the FX burden on your franchisee?
Not paying attention to foreign exchange rates and the unique considerations of international expansion can have ripple effects on your business and franchising strategy. Here are three ways to ease the complexities of cross-border invoicing.
Localize the invoice itself
For each new international market you enter, there may be regional, country-specific, and local regulations and laws to consider for invoicing that you must comply with. There are sometimes local regulations and laws guiding what exactly the invoice must look like and how it must be delivered. There are also the complexities of calculating payment itself, to account for FX rates, taxes and tariffs.
When your franchise is invoicing an international franchisee, you should consider:
- Invoice format and language requirements
- The way invoices are delivered and received
- Methods of payment and what that means for compliance requirements
- Transaction security and privacy requirements
- Taxation and FX rates and fees
- Assuring the correct documentation is sent by the payer for tax purposes
- How to best avoid short payment due to fluctuating FX rates
Spending time to fully understand, manage and keep up with all of this is no small task – receiving cross-border payments is never as simple as opening a bank account. It’s no wonder that companies eying global expansion cite managing international payments as a major obstacle. In a recent Flywire survey of more than 301 financial professionals:
- More than 90% said that their organization’s global expansion efforts could accelerate if they could find an easier way to deal with foreign exchange rates.
- Some 88% said the complexities of collecting cross-border payments impact their ability to grow.
- A full 40% said cross-border payment complexities impact their ability to grow “significantly.”
Support local currencies and payment methods
When you invoice international franchisees, there are two possibilities: invoice in your preferred currency and charge them with dealing with foreign transaction fees on their end, or offer currency choice, and ease the settlement and reconciliation on your end. The second option is preferred – and may even be necessary in order to comply with local laws or regulations. Everyone will appreciate the straightforward, convenient process.
Don’t underestimate the ripple effects of poor franchisee payment experiences
Your franchisees have a lot on their plates: running their businesses, growing their customer base, finding and training employees, and so on. Their main goal, of course, is to spend as much time as possible elevating your brand and growing the business.
If franchisees are spending too much time managing their payments to you with every invoice you send them, they have less time to spend on what you actually want and need them to do, which can cause them to suffer financially. Plus, if international invoicing is slowing down the turnaround for payment, it can have a huge impact on cash flow for your business.
By making things as easy as possible for your franchisees when invoicing and sending payments, you give them time back to grow the business and your brand.
To learn more about cross-border invoicing considerations, check out the 5 steps to invoicing international customers.