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Automating international payments

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Automating international payments - the many advantages for law firms expanding globally

Globalisation of the legal market is still growing, as law firms tap into the potential for expansion that cross-border markets offer. Firms venturing into international opportunities also face cost control challenges with accounts payable (AP). Compared with making domestic payments, making foreign payments involves significantly more risks and work, together with increased operating costs and demands on staff time. Firms which still rely on a paper-based process will need to understand and reduce to a minimum the risks associated with operating globally.

Risks & challenges

When law firms establish a presence in other countries, they will find that international markets represent a new financial backdrop. This holds real challenges for the AP team, such as managing the foreign exchange element and regulatory compliance.

AP teams face many operational challenges without the added weight of international payment processing. The AP business process is often paper-intensive and complicated, with workflows that are clumsy and hard to track. Maintaining accurate paper trails, tracking down critical documents, and handling exceptions all consume time and resources, slow down processing and increase the risk of errors. All of these can affect the ability to project and manage cash outflow accurately. Expanding internationally is a good time to stop and evaluate the current AP business process for ways to make it more efficient, less dependent on people and paper and less costly. 

What is currency risk?

Currency risk and unpredictability are embedded in every cross-border payment. Foreign exchange (FX) fluctuations, arising from the volatility in the currency markets, can be significant when suddenly moving money from one country to another and between currencies. Doing business internationally means either finding the most favourable exchange rates or risking loss – an effort that is both time-consuming and challenging. The FX market, accessible 24 hours a day, five days a week and spanning multiple time zones, exposes firms continually to the FX market’s currency fluctuations and changes. In addition, many cross-border suppliers pad their prices, or shorten their payment terms, to reduce the risk that their currency will depreciate against the dollar.

Monitoring changes manually may not be a workable solution if the volume of transactions is high. The amount of effort required to keep track of exchange rates is significant and adds new demands to staff time and cost. AP departments are rarely equipped to deal with the workings of FX and international payments.



Ensuring foreign payment procedures are UK compliant

Payments to vendors, entities or individuals in the EU / EEA are governed by compliance requirements and various regulatory agencies, including HM Treasury, FCA, the EU and other overseas bodies, such as the Office of Foreign Asset Control. Added to the burden of finding the most favourable exchange rates for your international transactions, ensuring compliance further erodes employee time, takes resources away from essential department functions and drives up costs.

So why develop a foreign exchange strategy?

The AP process is paper-intensive and complicated, with workflows that can often be inefficient and hard to track. Maintaining accurate paper trails, tracking down critical documents and handling exceptions is time-consuming, slows down process and increases the risk of errors. Expanding internationally is a good time to evaluate current AP business processes in order to develop a strategy that provides efficiencies and saves costs.

Developing a strategy involves identifying and reducing risks to a minimum. It should include the following steps:

  • Identify risks and analyse the impact of rate fluctuations on cash flow. This is based on transaction exposure, by tracking rate fluctuations and their impact on payments or receipts.
  • Measure exposure at both the parent firm and the cross-border office locations.
  • Establish your risk tolerances and limits.
  • Consider automating your foreign payment process.

The benefits of automation

The ultimate protection against excessive currency fluctuations comes from engaging with a specialist who offers seamless integration. Automation also provides additional benefits:

  • Guaranteed exchange rates eliminate the risk of currency fluctuation and billing write-offs.
  • There is no manual input and AP staff save valuable time by not keying in data twice.
  • Duplicate payments are eliminated.
  • Cash management is improved, with the ability to receive disbursement costs before paying the vendor.


“Firms with a payment automation solution in place achieve significantly higher levels of satisfaction across every area of the payment management operation. The right automation solution can improve AP workflow, help AP departments handle international and domestic payments more efficiently, and reduce operational costs and risks” The Gatepoint Research, March 2015

The market offers several options to address the AP business process and workflow automation. These include integration with your financial management and ERP systems, “touchless” processing direct from your supplier, document recognition and scanning, e-invoicing and approval routing and notification via desktop, tablet or mobile devices.

Full-service automation solutions are available in a variety of forms. These include implementing an in-house financial or ERP software system, by working with an outsource partner for AP and integrated online international payments processing, or through an arrangement with a software-as-a-service (SAAS) provider. Some firms adopt an integrated approach, with a workflow-driven financial or ERP system and an online international payments provider. Whichever approach is adopted, the result should be an end-to-end solution with a single workflow. This processes the invoice from initial request to payment, then sorts, extracts, and stores multiple fields in the firm’s internal data repositories, as required.

Automation enables firms to know exactly when and at what price their international payments are executed and how they are transmitted. This eliminates fluctuations in the final cost to the firm and improves the accuracy of forecasting the financial position.

An Aberdeen study in October 2013 entitled, “From the Shadows to the Forefront: AP Automation and the Strategic Vision,” shows that best-in-class adopters of AP-automation technology were able to process invoices at 17% of the cost of laggards (bottom 30 of survey respondents). In addition, they were 7.4 times more likely to capture early payment discounts and incremental savings, which contribute directly to cash flow. As the lifeline of cash flow, superior performance in the AR and AP business process has a clear impact on the firm’s bottom line. Payables is one of the best places to start for firms who are looking to reduce the impact of “going global” to a minimum, enhance financial forecasting integrity and attain their strategic goals.

If your firm is considering operating globally or if it already does operate globally, it may be worth ensuring your international payments process is up to the challenge.

First Published in Legal Abacus May/June 2016