Podcast

Episode: 247 |
Will Bachman:
Transferwise:
Episode
247

HOW TO THRIVE AS AN
INDEPENDENT PROFESSIONAL

Will Bachman

Transferwise

Show Notes

How to receive payment from a client in another country when your invoice is denominated in your own currency and when the invoice is in a foreign currency

How to send payment to a subcontractor or vendor in another country when the recipient’s account is denominated in your currency or in a foreign currency

How to set up a recipient for payment – the account info you’ll need

A deep dive on how to use Transferwise

One weekly email with bonus materials and summaries of each new episode:

Will Bachman 00:01
Welcome to Unleashed the show that explores how to thrive as an independent professional. Unleashed is produced by Umbrex, which connects you with the world’s top independent management consultants. I’m your host Will Bachman. Today’s show I’m going to discuss how to send or receive funds internationally. This is a topic that has caused me a bit of stress in the past, since when I did it the first time, it was all unfamiliar, and the idea of sending 10 or 20 or $50,000, through a process that I had never done before. Well, you hope that the money actually goes to the right person and not just into the ether. First, I’m going to discuss how to send or receive funds internationally, when there is no foreign currency exchange involved. Then I’ll discuss how to receive funds from a client that is paying you in a foreign currency, and how to pay a subcontractor whose bank account is denominated in a foreign currency from yours. Okay, so first, let’s cover a situation in which a client in another country is going to pay you in your own currency. So for example, I’m based in United States, and my bank account is in US dollars. Let’s say I have a client based in Germany. But we’ve agreed to a fee that is denominated in US dollars. In this situation, it’s actually pretty simple for me, I can just give them the info from my us checking account, and they can send me an international wire transfer, I can charge I get charged some flat fee by my bank to receive an international wire transfer, I think it’s either $30 or $40. And they get charged some flat fee as well. But the 30, or $40, would be a big deal if I’m getting paid 200 or $300. But for a payment of 10 or $20,000, I just basically ignore that fee. And the same works in reverse. If I’m paying a subcontractor and their account is denominated in US dollars, then I can send a plain international wire transfer from my bank account. At one bank, where I have an account, when I want to send an international wire transfer, I need to email the instructions to the customer service team. And then they call me to verify that my email hasn’t been hacked, and that I really do want to send them a wire transfer. And then they take care of sending it out at another bank, or I have a checking account, I can do this all myself and the online banking portal, I first add the recipient myself and then I can send the transfer. I’ve paid people in about half a dozen countries, including Australia, the UK, Germany, Spain, Canada, Armenia. And it seems that the specific banking information that I need to input to add a recipient, it varies depending on the country, that usually you’re gonna need from the subcontractor, the first and last name of the person, the email of the person, the name of the entity you’re paying. If you’re paying a business instead of if their name is not in the account if their business entity is on the account, the address of the person or of the entity, including the postal code, the name of their bank, the address of their bank of that bank branch, including the postal code, the type of account, whether it’s a savings account, checking account business checking account, the currency in which the account is denominated, which is not always the same as the currency of the person’s country. So person in the United Kingdom can get an account denominated in euros or US dollars, for example. So you should confirm the currency for European countries and some others about 69. In total, you need the International Bank account number or iba n or I van is easier adding a recipient account when the person’s from an country with an eye van. Because with this 34 alphanumeric code. It’s a unique identifier for that person’s bank account, and account number all in one, just one single code that identifies the account. So all you got to do is just enter that AI ban and the your bank will know the rest. For accounts outside the banned countries. Usually, you’re going to need a swift code to define and identify the bank, and then the account number to identify the specific account. If you aren’t sure what you’ll need, and your bank lets you add the recipient yourself. Go ahead and start adding a recipient. Select the country and then see what fields pop up. And those may vary depending on the country where the account is located. And then you can ask the subcontractor to supply it info to you. So here’s a tip. I’ve heard that there has been a rise of hackers or doing the following. Let’s say that you owe a subcontractor money. The hackers break into these subcontractors email account, and then send you from their email account looks like it’s coming from them updated wire transfer instructions with that was that the money would go to the hackers checking account. This actually happened to someone I know. So it’s a good practice to have your subcontractor call you and verbally confirm the account info that they’ve emailed to you. Okay, after you get the recipient all set up, it can make sense to first send a trial payment, maybe it’s in $100, you’ll need to pay an extra international wire transfer fee, but at least you get the peace of mind that all the pipes are connected properly, and that the money that you send is going to go to the right person. Okay? Overall, sending a wire transfer to an international wire, international recipient from your normal online banking platform is not that much different from sending a wire to a domestic recipient. So it’s relatively straightforward if there’s no currency exchange. Now it gets a bit more complicated if a client in other country is going to pay you in a foreign currency. Or if you need to pay a subcontractor in a foreign currency. Now, you can still use the same method I described above, however, you’re going to pay a lot more than you need to in foreign exchange fees. Now, if you’re just traveling in a foreign country, and you buy dinner for 100 bucks, and your credit card charges you a two or 3% in currency exchange fees, you don’t notice it that much. But if you’re receiving $50,000, then two or 3% starts to become pretty significant. And it’s worth investing the time to avoid a fee of 1000 or 15 $100 that you don’t need to pay. So there’s a couple services that I’ve used to avoid or to reduce that fee. And what these do is they connect to your bank in some way that I’ll describe what the one is oh FX, and the next one is transfer wise. I used o FX for a couple years, I’ve now shifted to transfer wise because transfer wise has significantly better features and it has better rates. However, I will say for effects, they do a very good customer service. And the rates were much better than my bank. So to give an example, let’s say if I had agreed to pay a subcontractor in the UK 30,000 pounds, if I pay them using a wire transfer from my bank, it would cost me around 800 to $1,000 more than if I used FX in dollars. So it really is worth the trouble of setting up an account. However, the rates with transferwise are even better than no FX. So I’ve switched to transferwise. And for that same 30,000 British Pound transfer transfer I was would save me something like $300 $400 compared to what it cost me with Oh effects. So I’ve shifted over to transferwise transferwise has an additional benefit, which is very cool. With transferwise. Once you create your online account, you can create accounts in different currencies. And you can actually leave money in those accounts. So let’s say a client in Germany pays me in euros, I’ll have that client pay those funds into my transferwise euro denominated account. Once the euros are there, if I want to, I can exchange those euros for dollars and send them to my US dollar denominated checking account in the US. But if I want to, I can leave those euros in that account. And right then or at some future point I can use those to pay a subcontractor or another vendor in euros. And that’s a huge plus, because I can now avoid the currency exchange fees in two directions. Before transfer was I had a client pay me in euros, so those funds would get converted into US dollars and deposited in my US dollar account in the US. And I pay that exchange fee in incoming direction. And then I would send the dollars to a subcontractor in Europe, and I’d have to pay the currency exchange fees again in that direction. With transferwise the client pays me in euros, I can use those euros to pay the subcontractor and then I keep the balance in my transferwise account until I need need them. You can also set up multiple accounts with transferwise and each additional one is free. I counted about 50 different currencies that are available, including the Botswana Pula, the Nepalese rupee, the Tanzanian shilling, and the Croatian kuna, the Moroccan dyrham and the Vietnamese Dong. If you had kept some euros in your euro denominated account and you didn’t need to pay a subcontractor in some other currency say the Indonesian Rupiah then you can make that direct transfer and at least you pay only one currency exchange v instead of going euros to dollars to Indonesia rupiah Okay, so how Does one use transferwise? First, go to their site, a link is in the show notes and register for an account. When you go through that process, I’ll admit it is a bit of a hassle. They have to follow the know your customer laws, anti money laundering, and they require you to upload a bunch of documents to prove that you are who you are, and that you have a legit reason to be sending money internationally. And that you’re not a criminal trying to do money laundering. So you may have to upload your copy of your passport or your driver’s license, the entity formation documents, bank statements, a bunch of stuff to prove that you are who you are. So, if you expect to be sending or receiving money internationally, don’t wait until the last minute plan on a week or so to get your account set up. Once you are confirmed, then let’s say you have a client that wants to pay you in Peruvian Solis, what you’ll do is you’ll log into transferwise account, you’ll open a balance denominated in Peruvian Solis. And I believe if it’s your very first account foreign currency account, you’ll need to fund that first account with a nominal amount, which I believe is $20. Subsequent accounts you don’t need to find. So once you’ve opened that account, which is instantaneous, you’ll have transferwise bank details that you will provide to that client. So you will actually have a transferwise bank account with an address in Peru that is denominated in Peruvian Solis. And when you’re so for your client paying you Peruvian, so there’s that for them will be a domestic transfer from Peru to Peru. When your client sends the Peruvian soldiers to your transferwise account, they will sit there for your use and you’ll get notified. If you want you can send those soldiers to your own checking account in the US or wherever you are at your regular bank. Or you can hold on to those solos if you think you’ll need to pay someone and so they say in the future. So now let’s say you need to pay someone, you first add the person as a recipient. As mentioned earlier, the info that you need will vary depending on what country they live in, and the currency of their account. Once you’ve added the person you can send money. Let’s say I am paying a person whose account is denominated in Malaysian ringgit, I could say I want to send 10,000 US dollars and the person gets however many ringgit the debt converts into which today would be 43,276 ringgit or I could say, No, I agreed to pay the person exactly 44,000 Malaysian ringgit. So using today’s exchange rate transferwise would make me pay $10,167.30. Within transferwise, you click on send money, you choose the amount you choose the recipient, you click Approve, and then there are a couple options. If you already have funds in a transferwise account, you can use an existing balance that you have like we spoke about before, or you will send a transfer from your own banks checking account to a transferwise account. That’s a domestic transfer in your own currency. So my checking accounts and dollars. So I send a domestic transfer from my bank to a US dollar denominated transferwise account in the US, I can send that as a wire transfer. So it arrives the same day, or I can send that as an a CH Automated Clearing House. So it arrives either the next day or in three days. The domestic wire transfer cost me $25 or $30. The next day a CH cost me $10. And the three day a CH cost me either $0 or $3. So I’ll choose among them depending on how urgent it is. Once transferwise receives those funds in dollars, it will automatically go ahead and initiate the transfer to the subcontractor who’s looking forward to receiving the 44,000 Malaysian ringgit. Again, if you’ve never paid the person before, consider sending a test payment first. And then check that the person got the funds before you send the full payment. It is good practice to set up the person as a recipient at the beginning of a project before you need to send them the funds and send a test payment then, that way, if there are any issues, you have plenty of time to resolve it. I’ve had one case where the person gave me an account number where one digit was off. And it took some back and forth until we figured what the problem was. And other cases where I needed more account info because their account their country has some unique requirements. In that case, I needed the number of their bank branch. So I hope this episode has been helpful. If you’ve been thinking about giving the show a five star review on iTunes now is a great time. Your review helps others discover the show. And if you would give it four stars or fewer, really just don’t bother. I’d love to hear from you. with any questions that you have about independent consulting, you can email me at unleashed@umbrex.com Thanks for listening

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