When you send your products to another country, you’ll have a whole new set of factors to deal with in order to get paid. Here’s what you need to consider.
Choosing a Currency
There’s no law that says which country’s currency you have to put on the invoice. You may choose to make it easier on yourself by specifying your home country’s currency (i.e. U.S. dollars), or use the customer’s home currency as a courtesy to them.
The right accounting software will do the currency calculations for you, saving you time and effort.
Handling the Exchange Rate
Currency exchange rates between countries go up and down on a daily basis. Given the time gap between when you invoice and when you get paid, you could end up receiving less for your goods than you thought you would.
You may decide to just accept this risk; many small businesses do. Or you can ask your bank to lock in the current exchange rate (known as forward cover). You’ll be protected against any drops in the rate, but you’ll also miss out on the extra money if the rate rises.
Protect yourself and make it convenient for your customers by offering an established international payment gateway such as debit card, credit card or an automated clearing house (PayPal, Stripe, etc.).
Because there’s a transaction fee with the above methods (2% to 4%), for large orders you may choose a telegraphic transfer directly from their bank to yours.
Include clear payment instructions on the invoice. To ensure that they’re understood, have them translated into your customer’s language.
For income tax, declare it on your return exactly as you would income made from local sales.
For sales tax in your home country, you don’t need to collect it. But don’t eliminate the sales tax line from the invoice; just put 0%. For sales tax in the country you’re exporting to, most of them don’t require it. However, that’s changing, especially for Amazon sellers. For example, Australia now requires you to collect 10% tax on goods sold to their residents through Amazon.
Paying Import Tariffs & Duties
If your customer’s home country applies duties to imported goods, those charges will be the responsibility of your customer. You don’t have to do anything about it.
It’s not advisable to send invoices through the regular mail to other countries. In the first place, it can be slow and unreliable. In the second place, the address formats can be tricky to get right. The preferred delivery methods are to email the invoice as a PDF attachment or send an online invoice through your accounting software.
This is one of the biggest reasons that small businesses hesitate to sell internationally. You have fewer options for debt collection and legal action, plus it’s more expensive. Only you can decide whether the sale is worth the risk.
Thanks to Amazon and other international platforms, the world is your market. Use these invoicing basics to feel confident in your ability to get your piece of the action … and watch your sales grow!