Paying in foreign currencies: 5 factors businesses often overlook

Unclear costs, slow payments, limited visibility, unpredictable cash flow and time-consuming manual work: these concerns have come up repeatedly in our conversations with internationally active Swiss SMEs over the past few months. Many underestimate both the costs involved and the impact across their business.

These difficulties can reflect the lack of a clear foreign exchange (FX) strategy. Today, we review five often-overlooked factors and explain how a more structured and intentional approach can help you understand your costs and regain control of your international payments. You may recognise your business in one or more of these situations.

1. Paying in USD or EUR by default

Does your supplier actually need the currency you are paying in? A USD or EUR invoice may feel straightforward to you, but your supplier may need another currency to cover its costs.

If it has to convert your payment, the cost and uncertainty of that conversion may already be built into its price. You could therefore be paying for a currency conversion that never appears on your statement.

A quote in the supplier’s own currency can help you compare the commercial terms, alongside your own conversion and payment costs. Our guide to emerging market currencies explores these considerations.

2. Costs beyond the FX rate

You may have negotiated a competitive rate and still pay more than expected to settle the invoice. Depending on your provider and payment route, the cost can include:

• an exchange cost embedded in the applied rate;

• transfer charges;

• fees deducted by intermediary or receiving banks;

• fixed account, platform or subscription fees.

Some charges are billed to you; others reduce what your supplier receives. A useful comparison is therefore the total CHF cost of delivering the full invoice amount.

Tip: For recurring payments, assess fixed fees against your expected activity and consider the time spent processing each run. Our guide to bulk payments explains how to reduce repetitive manual work.

3. The payment route

Do you know how your payment will reach your supplier? Two transfers in the same currency can take different routes.

• An international transfer may pass through correspondent banks, adding processing stages and possible fees.

• Where available, a local route uses domestic payment systems and can reduce the number of intermediaries, potentially limiting fees and delays.

The options available to you depend on the currency and destination.

If you also receive money in that currency, check the incoming route separately. Being able to pay locally does not automatically mean you can collect locally. Our guide to payments and collections explains the difference.

4. Converting the same funds twice

What happens when you receive a customer payment in USD? Some accounts automatically convert incoming foreign-currency funds into CHF.

If that happens and you later need USD to pay a supplier, you must buy dollars again. You have then made two conversions, each potentially carrying a spread cost. The rate may also have changed between them.

These repeated conversions can create recurring costs and operational inefficiencies, adding currency movements for your team to track and reconcile.

5. Waiting for a better rate

Are you postponing a conversion because you hope the rate will improve? While you wait, the CHF cost of a payment you still need to fund remains uncertain.

A favourable move could reduce the bill; an adverse one could increase it. If you have already set your selling price, that increase may come directly out of your expected profit margin. The payment deadline also limits how long you can wait.

Our take: How much could the cost rise before it disrupts your budget? Answering that question puts the consequences of waiting in business terms. It also helps you distinguish a deliberate decision to accept uncertainty from one made by default.

What can a clear FX strategy change?

Looking at these factors together gives you a clearer view of where costs arise and which decisions affect your budget. You can see where you could avoid converting funds, for example, by using EUR receipts to pay EUR invoices. You can also compare payment routes and assess how future exchange-rate changes could affect your costs. Your team then has a consistent basis for decisions as your activity grows.

At SwissFx, we can review your currency flows through an FX audit and explain which services are available for your needs. Here is how we can help you put that strategy into practice.