Introduction
For Indian startups expanding internationally, optimizing cross-border transactions can improve cash flow, reduce administrative overhead, and streamline business processes. Predictable cash flows are the bedrock of financial stability, regardless of size. Yet, for most founders, knowing the importance of efficient international transfers versus getting this done are very different.
If it’s a globally-funded start-up, managing transfer pricing–to transfer funds from the global HQ to its Indian subsidiary–can get tricky. A long list of factors make transfer pricing complex—high costs, long processing times, FX rate fluctuations, compliance headaches, and lack of customer support. These combined make international funds transfer inefficient, making it difficult for companies to meet payments, forecast accurately and achieve their financial goals.
Challenges in transfer pricing—getting to the root of it
Startup founders are already familiar with the problem of losing money on international fund transfers. Broadly, the pain points can be divided into two categories.
First, there are the monetary factors:
- High & opaque transaction fees: With wire transfers, the SWIFT fee itself could range from $25 to $100 per transaction, and the intermediary charges can vary from $15 to $50 per intermediary bank. And that’s just the tip of the iceberg – there are also hidden fees in the form of currency conversion markups, which could range anywhere from 1% to 5%. Then, there’s GST, which is applied to the currency conversion costs. Taken together, this makes for a high & largely unpredictable transaction fee.
- FX fluctuations: With FX rates varying by the second, an unexpected currency fluctuation can affect the amount received. If there is a large time gap between raising the invoice and receiving the payment, and the currency conversion rate happens to drop in the interim, it can lead to significant shortfalls.
Then, there’s all the time & effort it takes:
- Unnecessary delays: SWIFT transactions can take 2-5 business days to actually land in the recipient’s account. This can get tricky in situations where having adequate working capital is crucial for the smooth running of a business.
- Compliance hassles: Incoming funds into India mandate the requirement of a Payment Advice on an AD-1 bank letterhead. The process of getting these documents in order can take multiple follow ups with the banking partner.
- Lack of customer support: When complications do arise, customer support is hard to come by, which can lead to missed deadlines, unmet commitments and lack of adequate funds.
Steps towards efficient international payments
With so many different ways to lose time and money, how does one plug the leaks? Here are 4 key steps:
- Careful financial planning: Companies can establish a clear policy and goals that details the pricing structure for intercompany transactions between the headquarters and subsidiaries.
- Meticulous record keeping: Maintaining detailed records of intercompany transactions can help companies justify pricing decisions and stay compliant with transfer pricing laws.
- Mitigating risks: Companies can work with their financial partners to explore the possibility of optimizing for FX rates. This can help in ensuring accurate financial forecasting and cash flow management.
- Using local payment methods: By finding a way to collect payments through ACH Credit or Fedwire, companies can save on SWIFT fees & intermediary bank fees.
The Xflow solution for transfer pricing—saving you money, time & effort
There is, however, an easier option to manage your transfer pricing strategy. Partnering with a service that specializes in international payments means that you worry less about the uncertainties of transfer pricing, and focus on actually growing your business.
Xflow’s transfer pricing services are designed to make cross-border transactions quick, cost-effective, and compliant, with minimal risk. Here’s an overview of what we offer:
- Transparent & affordable pricing: No SWIFT charges, no intermediary bank charges, no hidden markups. Xflow charges only a 1% flat fee on the total amount, at a mid-market rate. You can be assured that you will get the true value of the transfer amount.
- Limitless transactions in a single invoice: No $10,000 transaction limit, which means you don’t have to worry about splitting invoices. Initiate payment in a single invoice with full compliance.
- Fast settlements: Unlike SWIFT transactions that take 2-5 business days to reflect in your account, Xflow ensures that the money lands by the next business day. This is possible because Xflow moves money using local payment methods like Fedwire & ACH.
- Efficient FX management: With Xflow, you can freeze today’s FX rate for up to 45 days. The flexibility offers your business protection from fluctuating FX rates. Alternatively, if you’d like to withdraw funds straight away, you can do it knowing the real time INR equivalent.
- Automated compliance: Xflow offers one-click eFIRA for every withdrawal in 24 hours, on the letterhead of an AD-I bank. Say goodbye to the constant back-and-forth with banks.
- Prompt communication & support: No queues or wait times to get the support you need. In case any issues arise, Xflow offers priority customer service so that you can receive your funds without any friction.
The result is pure convenience & predictability. All you have to do is submit your invoice and collect funds. We take care of everything else!
Take control of your international transfers with Xflow
"Xflow has helped us overcome the hurdles on transfer pricing payments and reduced the time it takes to receive them."
~ Srikrishna Swaminathan, Founder and CEO, factors.ai
By eliminating the complexities of transfer pricing, Xflow enables foreign funded startups in India to focus entirely on what really matters — growing their business, and delivering value to their customers. In a world where transfer pricing challenges are all too common, not having to deal with them can be a competitive advantage. All the money, time & effort saved can be re-invested in the business to create the edge that makes it stand out.
So if you’re ready to take total control of your finances and take transfer pricing hurdles off your plate, reach out to us for a demo.
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