How To Securely Transact With An Overseas Client
by Anand Srinivasan, founder of LeadJoint.com
Doing business with a client who is based outside your country can be a risky affair. For one, you may not really get a chance to meet them personally and vet their credentials. Also, contracts do not really make a lot of sense unless this is a deal worth thousands of dollars – filing lawsuits and getting court orders implemented may be impossible, expensive and time-consuming. Finally, even if you are dealing with a legitimate entity, communication and financial transactions may be confusing or expensive.
In this article, we will take a look at a few ways to deal securely with an overseas client:
Use An Escrow.
An escrow is a ‘middleman’ company that holds the client’s money until the project has been delivered. This way, the client cannot back off later from paying for the service provided. At the same time, your business may not get the payment until you have delivered on the project. While escrows are useful, they are also not cheap. Most escrow services start with a 10% commission, not including the currency exchange charges. Besides this, you may also need to pay more if you want the escrow company to adjudicate disagreements between the service provider and their client.
Break The Project Into Phases.
One way to avoid the high escrow charges is by breaking the project into phases. In this case, the client agrees to pay the service provider after the completion of each stage of the project. This minimizes the risk from both parties – the service provider only loses money for a smaller component of the project and while not ideal, this is a great workaround to losing money to escrow providers.
Use Online Transfer Tools.
While services like Paypal can be quite convenient, they can also be pretty expensive. For one, their transaction fee is percentage-based. As a result, the fee you pay to Paypal can get higher for larger projects. In addition to this, Paypal also charges you for currency conversion besides offering you an extremely unfavorable exchange rate.
Bank wire transfers can work but for a number of small businesses, they can be both confusing and expensive. Unlike domestic transactions, overseas wire transfers require you to enter a number of confusing banking codes like IBAN and BIC (also known as the SWIFT code). Besides, the average transfer fees are around $25 along with an exchange markup of as much as 5%.
You could instead make use of alternate transfer tools where transaction expenses are minimal. In this case, your clients can make the payment to a local bank account and the online service remits an equivalent amount in local currency to the service providers’ account. Since such transfers are bound by local laws, there is a higher level of transparency and lower fee.
Request Upfront Payment.
If you are an established business with good reputation, then the onus is on the client to prove their trustworthiness to you. In such cases, it is a good idea to request upfront payment before you begin a project. However, not all clients prefer to part with their cash before seeing work on the ground. One way to counter this is by providing special incentives like a discount to clients who wish to pay upfront. This is a win-win situation for both the client and the service provider and could thus avoid potential defaults later on.
Anand Srinivasan is the founder of LeadJoint.com, an online lead generation tool for digital marketing agencies. He is also a part-time marketing consultant and has previously worked with some of the most promising Indian startups.
This is an article contributed to Young Upstarts and published or republished here with permission. All rights of this work belong to the authors named in the article above.