Getting Paid Across Borders Without Margin Loss

You price a project carefully to secure a profit, but by the time the international client’s payment reaches your bank account, your margin has vanished. Between fluctuating exchange rates and unexpected intermediary bank deductions, cross-border invoicing often costs businesses far more than they anticipate.

Choosing the right currency for your invoice

When you sell to a customer in another country, the first decision is which currency to print on the invoice. You generally have three options: your local currency, the client’s local currency, or a widely traded third currency like the US Dollar or the Euro.

Billing in your own local currency is the safest option for your cash flow. If you expect to receive 5,000 Omani Rials, you bill exactly that amount. The client goes to their bank, asks to send 5,000 Omani Rials, and their bank calculates how much of their local currency is required to make the transfer. You receive exactly what you billed.

However, many large international clients prefer to be billed in their own currency to simplify their own accounts. If you agree to this, you are taking on the exchange risk. A third option is to use a major global currency. This is common in regions like South Asia and the Gulf, where businesses often default to invoicing in US Dollars for international trade.

Understanding exchange risk

Exchange risk is the financial uncertainty created by currency fluctuations between the date you issue the invoice and the date the client actually pays it.

If you issue an invoice in a foreign currency with a 30-day payment term, the value of that currency will move during those 30 days. If the currency weakens against your local money, the payment you eventually receive will be worth less than you projected. This directly reduces your profit margin.

Here is a comparison of how different currency choices affect who carries the financial risk:

Billing Currency	Who carries the exchange risk?	Impact on payment received
Your local currency	The client	You receive the exact amount billed.
Client’s local currency	You (the supplier)	The final amount you receive depends on the market rate on the day of transfer.
Third currency (e.g., USD)	Both parties	Both you and the client face uncertainty depending on how your respective currencies move against the third currency.

If you must bill in a foreign currency, you should factor this risk into your initial pricing. When you create your proposals using quotations, you can add a small buffer to the price to protect yourself against minor currency fluctuations before the client even agrees to the work.

Why the invoice exchange rate matters for your books

The currency you choose does not just affect your bank balance. It also has a direct impact on your bookkeeping and how you calculate your gross margin.

When you issue an invoice in a foreign currency, your accounting system needs to record that revenue in your base currency on the date the invoice is issued. For example, if you issue an invoice for 10,000 US Dollars, your books will record the equivalent value in your local currency based on the exchange rate on that specific day.

Thirty days later, the client pays the 10,000 US Dollars. By this time, the exchange rate has changed. When the money arrives in your local bank account, it converts to a different local amount than what you originally recorded.

This difference is called a realised exchange gain or loss. If the new rate gives you more local currency than you originally recorded, you have a realised gain. If it gives you less, you have a realised loss. You must record this difference in your accounting ledgers so that your profit and loss statement accurately reflects the reality of the transaction. Ignoring this step leads to messy books and inaccurate tax reporting at the end of the financial year.

Managing bank charges and intermediary fees

Exchange rates are only half of the cross-border payment equation. The other half involves bank fees. When money moves internationally through the SWIFT network, it often passes through one or more intermediary banks before reaching your account. These banks do not work for free.

When a client initiates an international wire transfer, their bank asks them who should pay the transfer fees. The client can choose one of three instruction codes:

• OUR: The client pays all bank charges. You receive the full invoice amount.
• SHA (Shared): The client pays their own bank’s fees, but any intermediary banks deduct their fees directly from the transferred amount. You receive less than you billed.
• BEN (Beneficiary): You pay all bank charges. The client’s bank and all intermediary banks deduct their fees from the principal amount. You receive significantly less than you billed.

Many clients will select SHA by default because it seems fair to share the costs. However, intermediary fees can be surprisingly high. To protect your margins, you must explicitly state your payment terms on your invoices. Add a clear note stating that all payments must be made free of bank charges to the beneficiary, and instruct the client to select the “OUR” option when setting up the wire transfer.

Essential documentation for overseas finance teams

Getting an international client to agree to your terms is a great first step, but their finance department cannot simply wire money across borders on a whim. International transfers are heavily regulated to prevent money laundering and capital flight.

Before an overseas finance team can release a payment, they usually need specific documentation from you. If you do not provide these documents upfront, your payment will be delayed while they chase you for the paperwork.

First, they need a perfectly formatted commercial invoice. A simple text document will not suffice. The invoice must clearly state your business name, registered address, and exact banking details (including the SWIFT/BIC code and your IBAN). Depending on the country, they may also require a proforma invoice before they can even initiate the purchase order process.

Second, many countries require clients to withhold tax on payments made to foreign contractors or suppliers. To avoid having this withholding tax deducted from your payment, you often need to provide a Tax Residency Certificate from your local government. This proves you pay taxes in your home country and allows the client to apply a double taxation treaty exemption. Refer to your local tax authority to find out how to request this certificate.

Finally, they may ask for a copy of your certificate of incorporation or commercial registration to prove you are a legitimate business entity. Having a folder with all these standard compliance documents ready to email will speed up your international payments considerably.

Structuring your international payment terms

To avoid disputes and margin erosion, your international payment terms must be exhaustive. A simple “Net 30” is not enough when dealing with cross-border transactions.

Your terms should specify the exact currency of the invoice. If you are billing in a foreign currency but expect to be paid in your local currency, you must state which exchange rate will apply (for example, the central bank rate on the day of payment).

You must also include the instructions regarding bank fees mentioned earlier. If a client ignores these terms and sends a payment that arrives short due to bank fees, you have to decide whether to absorb the loss or chase them for the remaining balance. Chasing small balances across borders is rarely cost-effective, which is why setting the rules clearly before the work begins is so important. Using Paper & Pen, you can save these specific international payment terms as default notes on your invoice templates, ensuring you never forget to include them on future bills.

What to do next

Review your current list of international clients and analyse how much margin you are losing to exchange rates and hidden fees. Next, update your standard contract terms to clearly define who bears the currency risk and stipulate that all bank transfer fees must be paid by the remitter. Finally, gather your tax residency and company registration documents into a single folder so you can provide them to overseas finance teams the moment they ask. By taking control of the invoicing process, you ensure that the profit you calculate on paper is the actual profit that lands in your bank account.