You’ve finally found it: the perfect supplier in Bali for your new line of handmade bags. The samples were amazing, you’ve sorted out the logistics, and you’ve agreed on a price of $500 for the first shipment. You head to your online banking, click a few buttons, and send the money. Easy, right?
While budgeting for a £400 transfer, a £420 charge appears. The extra £20 is a hidden fee, shrinking profits. Is this happening with every supplier payment? You’re not “alone”.
The profit leak: where does the money go?
For big businesses, losing billions of pounds on hidden fees is a significant problem, but for a home business, even losing £50 on a single supplier payment can wipe out the profit on that entire order. These costs may seem minor, but they hit small businesses the hardest. And with the number of private sector businesses falling by 125,000 recently, it’s more important than ever to keep margins protected.
1. The exchange rate trap: Think of it like exchanging holiday money. The rate you see on Google or a quick search is the “mid-market” rate—the real, live rate at which currencies are being traded. But when your bank processes a transfer, it gives you a different rate, often with a hidden markup. This spread is a fee in disguise, and it’s how banks make a profit on every single transfer you send.
2. The fee sandwich: The exchange rate isn’t the only concern. A typical bank transfer can involve more than one fee. Your bank often charges a sending fee, and sometimes your supplier’s bank will charge a receiving fee on their end.
A smarter way to pay: the modern alternative
Using a new financial service for global business payments protects your cash and bottom line. Unlike high-street banks, these providers offer better exchange rates and transparent fees, making them the right tool for international transfers and crucial for a global business. You wouldn’t use a hammer to turn a screw; so why use a high-street bank designed for local transfers to run a global home business?
Your 3 step checklist to stop losing profit
Taking control of your international payments doesn’t have to be complicated. Here is a simple checklist to follow before your next supplier payment.
1. Compare the rate: Always check the provider’s offered exchange rate against the ‘real’ mid-market rate you can find on sites like Google or XE.
2. Check the fees: Look for a provider with low, transparent transfer fees. Are there any other costs, or is it a single, flat fee? Clear, upfront fees mean no surprises.
3. Pay like a local: Choose a service that allows you to pay suppliers in their own currency using local payment networks. Using local networks often avoids the ‘fee sandwich’ and can result in faster, more direct transfers for your supplier.
Wrap up
As a home business owner, you’re already juggling a dozen things at once, and every single pound of profit counts. Taking control of your international payment strategy is one of the quickest wins you can have, putting money directly back into your pocket. By making a few simple, savvy changes to how you pay, you can make your business even more profitable and help it thrive.
