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Complex cross-border payments damaging supply chains

About three-quarters of US companies are doing it and yet it's often an inefficient and unaffordable process. The 'it' in question is (of course) cross-border payments, the management of which is often so bad it can damage supply chains and supplier relationships. This is at least according to research carried out by analysts PayStream Advisors and commissioned by payables automation software company Tipalti, which surveyed professionals in over 400 US companies. The main problems identified in the study are that cross-border payments are time-consuming, require manual input and result in payment fees. Not to mention increased risks and compliance with international tax and regulatory requirements.

The study showed that 87 per cent of international payments by the US companies in the survey were done by wire transfer.

And the graph below shows some of the main problems that lead to late payments and missed discounts. These include lengthy approval cycles, missing information on invoices and a large number of exceptions. The survey found that simply making cross-border payments is in itself a high-risk activity (compared to domestic transactions). Not only is the process more time-intensive and complex, it also involves currency conversion and an increased likelihood of missing information on invoices, a high number of exceptions, and difficulty keeping track of suppliers’ payment preferences. The report adds that companies with high cross-border payment volumes also have longer approval cycles, which limit early payments opportunities.

Some of the key findings from the report include:

  • Companies that make more than 2 per cent of their payments cross-border are overwhelmingly using wire transfers for international payments. However, wire transfers incur high processing fees and are now the second most targeted payment method by fraudsters, although they are still more reliable than paper checks.
  • Many companies with large volumes of cross-border transactions are increasingly prioritising global ACH to make payments. This has the advantage of a much lower fraud exposure than check and wire transfers.
  • The survey showed no increase in payments by paper cheque.
  • Four out of 10 companies report that 1-10 per cent of their suppliers offer some sort of early payment discount, while 7 per cent report that more than 75 per cent of their suppliers offer a discount.

PayStream Advisors' Anna Barnett, lead analyst on the report, commented: “To do cross-border payments right, accounts payable (AP) teams must add in several extra steps and controls. One example is validating payment data accuracy to avoid payment errors. Over 26,000 global rules exist across different regions and payment methods.”

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This item appears in the following sections:
Payments - Disbursements
International Payments

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