Benefits of opening a local currency account for international businesses
If your business operates internationally, then you know what a hassle international transfers can be. They not only take a long time to deliver from one account to another, but they also come with expensive transfer fees.
When you have a lot of customers who are located overseas, the cost of transfer fees can add up. One way to solve this problem is to utilize a local currency account.
It allows your customer to transfer money in their local currency without incurring high conversion markups that will eat away from your profits.
Challenges faced with an international wire transfer
On average, international wire transfers take 3-5 business days. In that time, the money that your overseas customer send goes through several banks before finally arriving in your bank account.
When the money leaves the customer’s account, their overseas bank might charge a conversion markup rate.
This means that if your customer sends USD 100, the amount that you receive may not be the SGD equivalent of that particular day’s exchange rate.
Not only that, but Singaporean banks have their own bank fees for international transfers, which will definitely add up over time, especially if you have a lot of long-term international customers.
If your money has to go through an intermediary bank before arriving at your Singaporean bank, they will charge you, too.
The money that arrives in your bank account will unfortunately be a result of several deductions, meaning that you will receive less than your invoice states due to the bank transfer and conversion fees.
Without a local currency account, reconciling your accounts receivable can also prove to be tough.
Not only is there a delay, but there will be a difference in the amount stated in your invoice and the amount you receive. At that point, it becomes difficult to tell which bank transfer is which invoice.
Benefits of opening local currency bank accounts
You can resolve the challenges that you face because of international bank transfers by opening local currency account.
With a local currency account, transfers from your international customers can arrive faster, and you won’t have to worry about expensive fees that occur during the process.
1. Leverage exchange rates
Using a local currency account for businesses means that your international customers can send money to you in their local currencies instead of converting it right off the bat to send it in SGD.
What this does is allow you to hold the payments in their native currencies when they arrive in your bank account.
You can convert to SGD depending on your needs or when the exchange rate works in your favor. You can also use customer payments in USD or other currencies to pay your foreign suppliers and convert directly.
2. Overdraft protection
A local currency account allows you to have the option of overdraft protection. In the case that you have insufficient funds in SGD, for example, your local currency account provider can cover all your SGD transactions for you.
If you have money in another currency, your account may pull from the other currency available to you.
If not, then some providers might charge interest for the overdraft payments. Regardless, this helps you mitigate the risks of foreign transactions.
3. Payments clear faster
One of the biggest benefits of doing your transactions through a local currency account is that international transfers can happen faster.
While international wire transfers can take up to 3-5 business days, foreign transfers from your customers to your local currency account usually arrive in only one business day.
There are no delays involved and you don’t need to worry about having to track your payments just to reconcile your accounts receivable.
4. Fees are customizable to needs
Opening local currency account opens up access to more competitive rates. Some local currency account providers allow you to tailor packages according to your business needs.
This way, neither you nor your customers will be charged huge fees during the transfer process. You can create packages and plans that will help you make the most profit despite the challenges of international transfers.
6. Avoid extra charges
You can bypass transfer fees and even FX fees with the help of a local currency account for businesses. Even though your business is based in Singapore and the currency you carry is SGD, you can open an account in USD.
Your US customers will be able to settle invoices and make payments straight to your USD account. You can avoid any conversion fees until you wish to convert to SGD when the rates are in your favor.
Most local currency accounts also offer low or USD 0 transfer fees.
7. Convenience in settling invoices
Invoicing your foreign customers in their local currency could create confusion if the money they send to you is in SGD.
Conversion rates are not only volatile, but international wire transfers will likely include conversion markups, meaning that what you receive in SGD won’t be exactly equal to what your invoice states.
Using a local currency account, your foreign customers can pay in their local currency according to what your invoices state. It’s easy to see which payment is for which invoice.
Now that you've explored the benefits of opening a local currency account, it's crucial to note that business accounts cater to a variety of businesses while corporate accounts are tailored for complex financial needs of large and established entities. If your business falls into the category of large corporation, we recommend exploring our detailed guide on steps to open a corporate bank account in Singapore to explore the step by step approach to navigate through the process seamlessly.
Get the best multi currency business account with Volopay
You don’t want to miss out on growing your business internationally just because you might face challenges when it comes to foreign transfers.
Volopay’s multi currency business account helps you grow your business while mitigating the hassle that comes with international transactions.
Your customers can send money to your account in their local currency, and you can hold multiple currencies to spend from using one centralized platform.
With a local currency account for more than one currency, you can easily pay vendors without having to take the toll of conversion and international transfer fees.
International business becomes more feasible with the help of Volopay’s multi-currency account.
FAQ's
Yes. Volopay charges a USD 0 transfer fee for all your international transactions. While conversion markups might still happen through the international transfer process, all transfers come with USD 0 processing fees.
Your funds are held in escrow accounts with Volopay. On behalf of you and Volopay, the third party, called escrow agents, will act to process your transactions. You can guarantee that your money is kept in a secure and separate escrow account. You have full control over all your funds.
Unlike traditional banks, Volopay is a centralized platform that allows you to manage and track all your transactions in real-time. With a dashboard that gives you an overview of your local currency account, you can control your business transactions from anywhere.