On October 31, 2023, the Reserve Bank of India (RBI) issued a master circular on the import of goods and services titled <a href="https://m.rbi.org.in//Scripts/NotificationUser.aspx?Id=12561&amp;Mode=0">Regulation of Payment Aggregator – Cross Border</a>.&nbsp;&nbsp;

According to the circular, the RBI will regulate all Indian entities facilitating online cross-border payments for the import and export of permissible goods and services. Moreover, these entities will be collectively termed Payment Aggregators Cross Border (PA-CB).

The circular comprises guidelines to streamline the existing cross-border payment framework in India. Previously, cross-border transactions were carried out through Online Payment Gateway Service Providers (<a href="https://www.skydo.com/blog/online-payment-gateway-service-provider-opgsp?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">OPGSPs</a>) as per a circular issued by RBI in 2015.

OPGSPs operate by partnering with an Authorised Dealer (Category I) Bank (AD Bank) and notifying the RBI. According to RBI guidelines, no formal license is needed to function as an OPGSP.

Hence, RBI has issued a circular to establish a concise and clear framework for cross-border payments. RBI will now oversee all cross-border payments in India related to the import and export of goods. The circular applies to PA-CB, PAs, authorised banks and OPGSPs.&nbsp;The PA-CB circular also denotes that there can’t be any new OPGSP.

This blog discusses the key provisions related to the latest RBI circular on the import of goods and services, RBI guidelines for payment gateway, and OPGSP guidelines.

Master Circular on Import of Goods and Services: RBI Bank Guidelines

The following are the key guidelines mentioned in the circular.

The following entities need to adhere to RBI guidelines/instructions provided in the circular.

Here are the key developments included in the new PACB circular.

Categories of Authorisation as per PA-CB Activity&nbsp;

Based on the cross-border payment activity undertaken by the PA-CBs, they can seek authorisation for one of the following three categories.

PA-CB, facilitating cross-border payments for Indian exporters, has to open an Export Collection Account (ECA) with an AD bank.&nbsp;

ECAs can be opened in either Indian currency or foreign currency. In the case of the latter, various ECAs have to be opened for different currencies.

The PA-CBs will credit all export proceeds in the respective ECAs. Additionally, export PA-CBs need to follow the below guidelines:

Similar to export PA-CBs, import PA-CBs have to open an Import Collection Account (ICA) with an AD bank.&nbsp;

They will collect the payment from importers in an escrow account managed by the payment aggregator. It will then be transferred to ICA and will eventually be transferred to the bank account of the foreign merchants.

These entities are allowed to directly onboard foreign merchants, e-commerce marketplaces, or other overseas entities that offer payment aggregation services.&nbsp;

Here are the guidelines Import PA-CBs need to follow.

Those PA-CB who engage in both import and export activities have to comply with the requirements for both Import PA-CB and Export PA-CB.

They also need to ensure that the maximum value per unit of exported or imported goods or services should be ₹25,00,000.

Non-banks who want to provide PA-CB services will have to seek authorisation from RBI. However, before seeking RBI authorisation, it is necessary to register with the Financial Intelligence Unit-India (FIU-IND).&nbsp;

However, RBI has issued the following net-worth criteria for non-banks providing PA-CB services.

The accounts of existing non-bank PA-CB who are unable to meet the net worth requirement will be closed by banks by 31 July 2024.

Snapshot Comparison Between OPGSP Circular (2015) and PA-CB Circular (2023)&nbsp;

Here are the key differences between the OPGSP Circular (2015) and the PA-CB Circular (2023)

Here is the process of seeking approval from RBI for existing or new PA-CBs.

Step 1: Draft the application through Form A, which includes the following parts.

Step 3: The RBI will process the application.

(RBI may raise queries related to various aspects such as shareholding, product processes, etc.)&nbsp;

Step 4: In principle approval from RBI.

Step 5: Filing of system Audit Report

(RBI may raise queries related to SAR audit observations)&nbsp;

Step 6: Final authorisation(state additional conditions that must be complied with)&nbsp;

The evolving cross-border payments environment and the emergence of several OPGSPs and other fintech entities encouraged RBI to issue the circular. Its main purpose is to ensure seamless and more transparent cross-border payment transactions.

Even though regulatory authorities are constantly working on making cross-border payment transactions seamless, transparent, secure, and quicker, businesses often face difficulties in receiving timely payments.&nbsp;

Skydo aims to simplify the cross-border payment landscape for businesses by automating various tasks and helping businesses open foreign bank accounts. <a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Join Skydo today</a> to streamline your invoicing and financial management activities!

Q1. RBI’s master circular on the import of goods and services and cross-border payments applies to which entities?

Ans. AD banks, PAs, and PA-CBs involved in the online processing/settlement of cross-border payment transactions related to the import and export of goods and services have to comply with the guidelines mentioned in the circular.

Q2. What are various compliances according to RBI payment aggregator guidelines for cross-border payments?

Ans. All PA-CBs have to follow the guidelines provided in the circular dated October 31, 2023. Additionally, they also have to follow the various guidelines for payment aggregators mentioned under a circular issued by RBI on March 17, 2020.&nbsp;The circular includes guidelines related to customer grievance redressal and compliance with Baseline Technology Guidelines to ensure fraud prevention and risk management.

Q3. How can PA-CB seek authorisation for facilitating cross-border payment transactions?

Ans. AD banks do not need to seek authorisation to facilitate cross-border payment transactions. However, a non-bank PA-CB can seek authorisation from RBI by sending the application to the Department of Payment and Settlement Systems (DPSS), RBI, Central Office (CO), by April 30, 2024. PA-CB entities must fulfil the minimum net worth criteria before applying to RBI.

 Know more about RBI's circular that mandates payment aggregators to seek authorization for facilitating cross-border transactions by April 30, 2024.

BI’s PACB Circular: Key OPGSP Updates of 2024 to Note 

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For Indian tech exporters like Ravi in the bustling city of Bengaluru, the booming tech industry offers immense opportunities. However, managing cross-border payments can be incredibly complex.&nbsp;

From navigating <a href="https://www.skydo.com/blog/how-much-forex-fees-do-you-pay-on-your-international-transactions?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">international transaction fees</a> to dealing with currency conversion rates and delayed payments to cumbersome documentation - understanding and overcoming these obstacles can be difficult and time-consuming.

B2B cross-border payment challenges can have more than just financial impacts. They can lead to strained client relationships, delayed projects, and decreased trust. These issues are especially damaging in digital marketing, where timely delivery and trust are key to success.

This blog explains how Ravi and other tech exporters can solve this problem, moving from chaos to convenience.

Cross-Border Payments for Tech Exporters Today

India is a powerhouse of tech innovation and digital solutions. Over the past decade, it has become one of the world's biggest internet markets, with an estimated tech revenue of <a href="https://nasscom.in/knowledge-center/publications/technology-sector-india-2023-strategic-review#:~:text=In%20FY2023%2C%20India's%20technology%20industry,11.4%25%20in%20constant%20currency%20terms.">$245 Bn in 2023</a> - exports alone will contribute $194 Bn while showcasing 9.4% growth. With its rich software development capabilities, India provides cutting-edge technological advancements revolutionising the global tech industry.

However, these figures merely hint at the tip of the iceberg. Beyond the numbers, an exhilarating ecosystem thrives, encompassing a myriad of startups, renowned tech giants, and enthusiastic individuals, collectively propelling the limits of what can be achieved.

India's tech industry is an ever-expanding powerhouse of potential and talent, filled with innovators from every corner of the nation. The growth opportunities are seemingly endless, from Bengaluru's tech-savvy entrepreneurs to Hyderabad's leading AI and machine learning experts.&nbsp;

As technology advances, India aims for rapid expansion within its borders and strives to become a renowned force in the global market. With each tech solution comes possibilities to achieve success on an international scale—from Mumbai's bustling city to New York’s metropolis.

As a tech exporter, Ravi's business encounters numerous obstacles regarding cross-border payments. With each transaction, he faces a daunting list of challenges.

For Ravi, these issues represent more than just operational inefficiencies. These obstacles potentially hinder his business's growth and prosperity, impacting profitability, client relationships, and his ability to compete effectively in the <a href="https://www.skydo.com/blog/building-a-global-network-of-customers-for-your-cross-border-business?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">global market</a>.

Skydo: A Game-Changer in Cross-Border Payments

Skydo offers a comprehensive solution designed specifically for tech exporters like Ravi. Here's why Skydo is the ultimate game-changer:

With Skydo, Ravi can bid farewell to lengthy payment wait times. Skydo guarantees quick payment processing with real-time payment tracking, ensuring a steady cash flow for tech exporters allowing them to focus on scaling their businesses.

Security is paramount to Skydo. Robust security measures are implemented, safeguarding every transaction against potential threats. Ravi can rest easy, knowing that his payments are protected.

Skydo's platform provides complete transparency, clearly laying out all transaction fees and exchange rates. Ravi can effortlessly track payments without any hidden costs.

Skydo's user-friendly interface allows Ravi to navigate effortlessly, saving time and effort. It's simplicity at its best.

Skydo stands out with its cost-effective approach. Competitive transaction fees and favourable exchange rates allow Ravi to maximise profits without compromising service quality.

Skydo's direct integration with banks ensures seamless payments, with no intermediary delays. This direct link simplifies the process, saving time and boosting efficiency.

Ravi can rely on Skydo's dedicated customer support, which is always available to promptly address any challenges or queries. Smooth operations are guaranteed.

Skydo is the long-awaited B2B cross-border payment solution that tech exporters like Ravi have been searching for. It revolutionises the <a href="https://www.skydo.com/blog/future-of-cross-border-payments-2030-and-beyond?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">cross-border payment landscape</a>, transforming a once cumbersome process into a seamless, efficient one.

Leverage your Cross-Border Payment System

Cross-border payments can be complex, but with the right approach, you can streamline the process and ensure efficient international transactions. Here are some valuable tips to make the most of your B2B cross-border payment solutions.

Instant access to real-time transaction details can be a game-changer when resolving client queries or addressing issues. Opt for payment platforms that provide comprehensive transaction tracking to stay informed and take immediate action if needed.

Different countries have specific financial regulations, and adhering to them is crucial. Before initiating any international payment, familiarise yourself with the compliance guidelines relevant to the transaction's origin and destination. This helps to ensure your payments stay within the boundaries of the law and avoids potential penalties.

Enable notifications on your payment platform to receive instant alerts for completed transactions. This is particularly valuable when dealing with numerous payments daily. Stay updated through mobile apps or email notifications to track your payment progress effortlessly.

Consider setting up automated transfers for recurring obligations like monthly vendor payments. With automation, you can ensure timely settlements without manual intervention for every payment. This reduces hassle and guarantees punctuality for your regular transactions.

Don't hesitate to reach out to the support team of your payment platform when faced with uncertainties or challenges. They can provide guidance, clarity, and assistance in facilitating smooth transactions. Look for platforms with responsive customer support to help you navigate any hurdles.

By implementing these strategies and proactively managing B2B cross-border payments, tech exporters can streamline their processes, ensuring efficient and timely international transactions. Maximise the potential of your cross-border payment system and unlock growth opportunities for your business.

In the digital era, tech exporters have a wealth of opportunities at their fingertips. To successfully capitalise on these opportunities, they need to ensure efficient back-end processes and seamless operations, emphasising timeliness and precision.&nbsp;

Skydo is a cross-border payment system that facilitates this. It simplifies financial transactions, minimising delays and ensuring timely payments. With streamlined financials enabled by Skydo, tech exporters can focus on innovation and expansion as they look to tap into new markets and diversify their client base sustainably in the future.&nbsp;

<a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Reach out for a quick demo of Skydo today.</a>

Ans: Cross-border payments refer to financial transactions that involve the transfer of money or value across national borders, typically between individuals, businesses, or financial institutions located in different countries.

Ans: Real-time cross-border payments work through a series of intermediaries, such as banks or payment processors, that facilitate the transfer of funds between the payer and the payee, often involving currency conversion and complying with international regulations.

Q3: What are the challenges with B2B cross-border payments?

Ans: Challenges with B2B cross-border payments include currency conversion costs, varying regulatory frameworks, delays in processing, and the complexity of dealing with different banking systems and payment methods across countries.

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Expanding your business globally and catering to international customers is a significant growth opportunity. According to the Ministry of Commerce and Industry, <a href="https://www.google.com/amp/s/www.business-standard.com/amp/economy/news/services-exports-may-reach-usd-400-bn-during-2023-24-sepc-123041900386_1.html">Indian export services</a> grew by 42% in 2022-23 from 2021-22.&nbsp;

Export helps diversify your business into various markets, gives you access to a wider audience, generates greater revenue, and helps you gain foreign investment opportunities. However, it has its set of challenges.&nbsp;

One of these challenges is receiving payments from international clients. The common issues with cross-border payments include exchange rates, hidden fees, tracking, processing fees and defaults. They affect cash flow and, by extension, business success.&nbsp;

An accountant plays a pivotal role in managing the financial aspects of cross-border transactions and ensuring smooth payments from US clients. Their attention to detail, financial expertise, and ability to track and manage cash flow effectively contribute significantly to avoiding financial losses and supporting business growth in international markets.

However, billing US clients and successfully receiving the payments in your company's bank account can be a long battle. You have to be careful of every step and be prepared for the next action to avoid non-payment or delays in payment. Therefore, if you’re looking to expand your service offerings to the US, it is essential to create and follow a checklist for receiving payments from them.&nbsp;

The purpose is to avoid financial losses and ensure business growth. Here is a step-by-step concrete checklist for your accountant on how to bill and receive payments from your US clients.

Your Accountant’s Checklist for Global Payments

As tech exporters, you might have to purchase hardware or software to provide services to your client. You may also have to pay suppliers and consultants working on the project and keep advance stock. It helps you prepare a defined process on how and when you want to receive money from US clients.&nbsp;

You can keep the following points in mind while discussing payment terms with your client.

Once you have defined the payment terms, you must check legal and regulatory compliances. Under the <a href="https://www.skydo.com/blog/gst-format-matters-heres-why-and-what-it-includes?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">GST regime</a>, the export of services is covered under 'zero-rated supply', which means that zero GST is charged on export.&nbsp;

If you receive payments in US dollars, zero GST will be applicable. However, if you receive the payment in Indian currency, 18% GST will be applicable on foreign exchange transactions.&nbsp;Before accepting money from the US, your accountant needs to ensure that you have met the following legal requirements:

Also read: <a href="https://www.skydo.com/blog/understanding-gstin-requirements-for-export-businesses-in-india?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Understanding GSTIN Requirements for Export Businesses in India</a>

The next step is choosing the appropriate payment method to receive money from the US. These can include:

You can finalise the appropriate mode for receiving payment by considering the following factors:

You can also read: <a href="https://www.skydo.com/blog/payment-trends-to-watch-out-for-in-the-global-business-landscape?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Payment Trends to Watch Out for in the Global Business Landscape</a>

Another crucial step in getting money from the US or any domestic or international client is to keep proper records and documentation of all transactions, taxes withheld, bank transaction charges, and other relevant documents. This helps tally the balance sheet and perform financial audits at the end of the financial year.

A crucial accounting process, it involves organising financial data in a structured manner and preparing informative reports on such data. It can include both financial and performance reporting.&nbsp;

While financial reporting includes identifying and recording various international transactions and preparing financial statements, performance reporting refers to analysing the financial performance of the company basis predefined objectives.

Once you have received payment confirmation from your client, your accountant must do proper bank reconciliation to verify the payments and ensure that all payments are correctly recorded in the company's books. Bank reconciliation helps avoid any discrepancies in financial records, such as currency conversion charges.

Stuck international payments block cash flow and might hinder your regular business operations. Skydo streamlines the process of receiving money from US clients. Let's understand how.

There are two scenarios while receiving money from the US:

Scenario 1: The client pays in the US currency.&nbsp;

In such a case, the amount is immediately deducted from the client's bank account and transferred to your account, then converted into rupees from US dollars.&nbsp;

Currency conversion often occurs over several days, and banks charge hefty fees per transaction. Another challenge is bank reconciliation because the amount after currency conversion does not match the invoice amount. Fluctuations in exchange rates may further create a mismatch.

Scenario 2: The client remits money in INR.&nbsp;

In this case, the money is not immediately wired from the client's bank account. It is first converted from US dollars to Indian currency. This is a tedious process which can take up to a week before the funds are withdrawn from the client's account.

Also read: <a href="https://www.skydo.com/blog/should-i-invoice-in-inr-or-foreign-currency?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Should I Invoice in INR or Foreign Currency?</a>

In both scenarios, the payment can take up to one week or even more to finally reach your business' bank account. Skydo aims to simplify this process, making it easier and faster to receive money from US clients by helping businesses open a local receiving bank account in the US.&nbsp;

The client easily transfers the payment to the local bank amount, which can be claimed as foreign inward remittances. Hence, Skydo reduces the time processing time and various charges and helps you get your money from the US without any hassle.

In addition to opening a <a href="https://www.skydo.com/blog/seamless-payment-experience-with-international-bank-accounts?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">local receiving bank account</a> in the US, the following are some additional features of Skydo that help make the payment receiving and managing process more robust.&nbsp;

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Importance of Regular Communication with Your Accountant

The role of your accountant is not restricted to receiving global payments. You need to ensure regular and clear communication with them. Here's why:

The following is a list of tools and integrations that you can leverage for effective communication with your accountant:

Also read: <a href="https://www.skydo.com/blog/top-accounting-tools-for-a-streamlined-bookkeeping-experience-for-tech-exporters?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Top Accounting Tools for a Streamlined Bookkeeping Experience for Tech Exporters</a>

Having a checklist in place to receive money from the US makes the process more effective and simpler. It gives the accountant a proper idea of the actions to be taken to receive money and how to tackle various hurdles faced while receiving payments.&nbsp;

Skydo provides live foreign exchange rates and charges a flat fee per transaction, thus ensuring smooth <a href="https://www.skydo.com/blog/how-much-forex-fees-do-you-pay-on-your-international-transactions?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">international payments</a>. It becomes easier for you and your accountant to keep track of international payments and optimise your cash flow. This further helps your business grow and tap opportunities in the market at an early stage.&nbsp;

Q1. How does currency conversion affect international transactions?

Ans: Currency conversion significantly impacts international transactions by introducing potential discrepancies and affecting the final amount received. Exchange rates fluctuate, leading to variations in the converted amount. This dynamic process can result in financial discrepancies, affecting the accuracy of recorded transactions.&nbsp;

Q2. Are there legal considerations for receiving payments from the US?

Ans: Yes, legal considerations are crucial when receiving payments from the US. Businesses must adhere to regulatory requirements and tax obligations.&nbsp;

In the context of international transactions, compliance with the Import Export Code (IEC), understanding GST regulations, and furnishing necessary documents, such as a <a href="https://www.skydo.com/blog/everything-you-need-to-know-about-lut?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Letter of Undertaking (LUT)</a> or bond, is essential. Ensuring proper agreements with US clients and meeting legal prerequisites is vital to facilitate smooth and compliant cross-border financial transactions.

Q3. What is the difference between import LC and export LC?

Ans: Import LC (Letter of Credit) and Export LC refer to financial instruments in international trade. An Import LC is issued by the buyer's bank, ensuring payment to the seller upon receipt of specified documents.

Conversely, an Export LC is issued by the seller's bank, guaranteeing payment upon fulfilling agreed-upon conditions. Import LC protects the buyer, while Export LC safeguards the seller, providing a secure framework for global transactions and mitigating risks for both parties.

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Every entrepreneur dreams of scaling their business beyond domestic boundaries. A <a href="https://www.skydo.com/blog/eight-point-guide-to-take-your-service-business-global">global presence</a> for a business is a crucial step towards heightened profitability. However, achieving this profitability relies on invoicing with a suitable currency exchange rate.&nbsp;

Navigating the complexities of <a href="https://www.skydo.com/blog/should-i-invoice-in-inr-or-foreign-currency?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">foreign currency invoices</a> is critical to businesses that transact internationally to ensure regulatory compliance and transparent accounting.&nbsp;

Additionally, when there are many diverse currencies to consider during invoicing, exchange rate risks can be a significant challenge, impacting your business's financial stability and profitability.

This blog explains how to choose the right currency exchange rate to invoice international customers.

Exchange Rate Options for Foreign Currency Invoices

The exchange rate effect determines the amount you receive for the work done for a foreign client. However, as the currency exchange rate fluctuates frequently, determining the right invoice amount could be the difference between making a profit or an absolute loss for the work done.&nbsp;

There are two ways to decide on an estimated exchange rate to help you break even or profit from the work done for a foreign client.

This exchange rate applied to your foreign currency invoice is the rate on the day you send it to the client. The current exchange rate reflects the amount you will receive in your local currency if you charge this amount in your invoice for that specific day.&nbsp;

Let's say your business sells a service to an international customer for 100 Euros on September 1st. That day, the exchange rate was 1 Euro to INR 89. Your invoice would show the equivalent value as INR 8,900.

The Pros of this currency exchange rate option include–

The Cons of this currency exchange rate option include–

The average currency exchange rate involves calculating an average rate over a specific period, which could be a day, week, month, or any custom-defined time frame. This approach smooths out short-term fluctuations in exchange rates.

Suppose your business enters into a year-long contract with a foreign client. To determine the exchange rate for invoicing for the entire year, you calculate the average rate over the previous month. If the average rate is 1 USD to INR 80, you'll invoice transactions accordingly.

The Cons of this currency exchange rate option include–

Choosing between these two exchange rate options depends on your specific needs, risk tolerance, and the nature of your international transactions.&nbsp;

The current exchange rate is suitable for those who require real-time values, while the average exchange rate is a better choice for long-term financial planning and stability, particularly when dealing with international partners and long-term contracts.

However, businesses must consider additional factors before choosing between the current and average currency exchange rates as specified below.

Factors Influencing Currency Exchange Rate

Currency exchange rates fluctuate based on demand and supply, trading volumes, and many other parameters. These dynamic market factors create a chain reaction resulting in currency exchange rates fluctuating in real-time.&nbsp;

Foreign currency transactions are one-time, limited-time, and regular. Each type influences exchange rate choices, contributing to accounting and financial prospects.&nbsp;&nbsp;

For example, as an Indian tech service exporter, you offered a one-time software development project to a U.S. client. In this case, it is a one-time foreign currency transaction, and the choice of exchange rate can influence the project's profitability and financial records.

Businesses may have to comply with specific regulations and accounting standards when dealing with foreign exchange. Relevant accounting bodies such as the <a href="https://www.ifrs.org/">International Financial Reporting Standards (IFRS)</a> have created respective foreign exchange guidelines under <a href="https://www.rbi.org.in/scripts/Fema.aspx">FEMA</a>.&nbsp;

Furthermore, companies also have to adhere to <a href="https://www.ojp.gov/sites/g/files/xyckuh241/files/media/document/GAAP_Guide_Sheet_508.pdf">Generally Accepted Accounting Principles (GAAP)</a> for foreign currency accounting. These standards and regulations can impact the choice of exchange rate for financial reporting and taxation purposes.&nbsp;

180 currencies circulate in 197 countries worldwide. Some currencies, such as USD or EUR, are stable compared to AUD or JPY.

Highly volatile currencies are riskier to hold, and companies may choose the average currency exchange method to mitigate the negative effect of the volatility. However, low-volatility currencies are ideal for real-time conversion through currency exchange rates.&nbsp;

4. Company policy and risk tolerance&nbsp;

Companies with a low tolerance for exchange rate risk may opt for strategies that minimise risk, such as using average exchange rates.

In contrast, companies with higher risk tolerance may take more chances with spot rates. Furthermore, some companies may have agreements with foreign suppliers or customers to use a specific average exchange rate for invoicing.



Best Practices for Choosing an Exchange Rate Approach

Choosing the right exchange rate is crucial for businesses dealing with <a href="https://www.skydo.com/blog/transforming-your-invoicing-experience-with-skydo?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">invoicing in foreign currencies</a>. The choice between the current currency exchange rate and the average currency exchange rate should align with the specific business needs.&nbsp;

It should also conform to internal policies to ensure that the business minimises currency exchange risk. Additionally, it ensures that conversions occur at the most favourable exchange rate.

Here are some best practices to consider before choosing the exchange rate before you learn how to invoice customers: 



How to Mitigate Currency Exchange Rate Risk

Companies must create and execute policies/activities to mitigate the <a href="https://www.skydo.com/blog/how-skydo-increased-success-rate-on-international-payments?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">currency exchange risk</a>. Here are several strategies and techniques to achieve this objective.

How to Create an Invoice with the Right Currency Exchange Rate

You can also leverage <a href="https://dashboard.skydo.com/new-invoice/1995?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Skydo’s free invoicing tool</a> to create an international invoice in under 2 minutes.&nbsp;

Additionally, <a href="https://fx-calculator.skydo.com/comparison?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Skydo’s FX calculator</a> provides live currency exchange rates without any added margins, ensuring that you receive the optimal price for your global invoices through our payment platform.

International transactions are vital for businesses with a global presence. However, fluctuations in exchange rate effects can impact your venture’s profitability and financial stability. Therefore, you must choose between an effective exchange rate approach to streamline your foreign currency invoices and the resulting currency conversion.

Understand the affective factors, the types of available currency exchange, and the factors you should consider before choosing between the two currency exchange options.&nbsp;

Q1. How Do Exchange Rates Affect International Trade?

Ans: Exchange rates impact international trade by changing the relative costs of goods and services between countries. A strong domestic currency can make exports more expensive, while a weak currency can boost exports but increase the cost of imports. This affects trade balances and competitiveness.

Ans: To invoice as an LLC, create professional invoices with your company's name and address, itemise goods or services provided, specify payment terms, and send them to clients.

Ans: International invoicing involves creating invoices for goods or services provided to clients in foreign countries while meeting their distinct requirements and regulations to ensure compliance.

Q4. How do I make international invoices?

Ans: To create an international invoice, use your company's details, specify services and prices, add currency exchange rates, and ensure compliance with international tax regulations. Once you review all the details, send it to your client and follow up.

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As Indian businesses expand globally, managing payments in multiple currencies has become more than just a convenience; it’s a competitive edge.

Whether you're an exporter billing clients in USD or a SaaS company offering subscriptions in EUR and GBP, a multi-currency account can simplify how you receive, hold, and manage your international earnings.

But what exactly is a multi-currency account? And why is it becoming essential for modern Indian businesses?

A multi-currency account (sometimes called a foreign currency account or international account) lets individuals or businesses receive, hold, and send money in multiple currencies from a single platform.

Unlike traditional bank accounts that immediately convert foreign currency to INR (often with heavy fees), multicurrency accounts let you:

For example, if you have received payment from an international client from the US in USD, you can hold the payment in USD in your multi-currency account. If you have to pay a client in USD, you can use the current funds for direct payment without converting your local currency to USD.

Some multi-currency accounts come with additional features which can help in increasing the return potential. For example, some multi-currency accounts may offer interest on the balances held in different currencies, while some may offer access to foreign exchange markets.&nbsp;

Which Currencies Can I Hold in a Multi Currency Account?

The accepted currencies in a multi-currency account range between 30-200, depending on the financial institution. However, a multi-currency account facilitates, at minimum, transacting in the following currencies.

Benefits of Multi-Currency Accounts for Indian Businesses

1. Save More by Converting When It Makes Sense