Optimizing Working Capital Through Smarter Cross-Border Payments

When it comes to optimizing working capital, companies most often think about negotiating longer payment terms with suppliers or speeding up collection of receivables. International payments — currency conversion, settlement timing, choice of payment provider — get less attention, even though they often hide a significant, underrated reserve.

This article explains how the structure of international payments affects a company's working capital, and what concrete steps can be taken without raising additional financing.

How international payments connect to working capital

Working capital is the difference between a company's current assets and current liabilities — essentially reflecting how much money is "tied up" in the operating cycle. International payments affect this in several ways:

• Settlement timing: if a supplier payment takes longer than necessary to process due to an inefficient transfer route, the company's money is effectively tied up longer than it should be.
• Foreign-currency balances: funds held in foreign currency with no clear plan for use represent capital that could otherwise be working more efficiently.
• Conversion cost: every currency conversion done at an unfavorable rate or with a high fee is, in effect, a hidden drain on working capital.

Concrete steps toward optimization

Matching payment currency to receipt currency

If a company earns revenue in a given currency and also pays some expenses in that same currency, using a multi-currency account to settle directly between those flows (without a double conversion through the local currency) reduces both conversion cost and the number of days funds sit idle in transit.

Reviewing cross-border payment routes

Not all transfer routes are equally fast. Using local payment rails where possible, instead of a standard SWIFT transfer, can cut settlement time from several days to a few hours — which directly affects how many days working capital stays tied up in transit.

Systematically comparing payment providers

The difference in applied rate and fee between providers can be significant for the same amount and currency pair. Regularly comparing terms across providers, rather than doing it once, reveals where a company is losing working capital without an obvious reason.

Optimization area	How it affects working capital
Matching payment and receipt currency	Fewer conversions, less lost to spread
Local payment rails instead of SWIFT	Fewer days in transit, faster fund availability
Regular provider comparison	Lower hidden cost from rate and fees
Multi-currency accounts	Less need to convert funds "just in case"

A practical example

A company exporting equipment to Europe while also purchasing some components from a European supplier used to convert all its euro revenue back to local currency, then convert part of it back into euros again to pay the supplier — effectively doing a double conversion with a double spread.

By switching to a multi-currency account, the company could use incoming euro revenue directly to pay the supplier in the same currency, skipping the double conversion. This not only reduced direct spread costs, but also cut the number of days funds stayed "in transit" between the two operations — directly freeing up working capital without raising additional financing.

What to consider when implementing this

• The real volume and structure of currency flows: before changing anything, it helps to have a clear picture of which currencies the company receives and spends in.
• Compatibility with the existing accounting system: changes to how payments are processed need to be correctly reflected in accounting, or savings on fees get offset by extra manual reconciliation work.
• Regularly reviewing terms: payment-provider terms change over time — a one-off comparison doesn't guarantee the chosen terms stay optimal for long.
• Realistic expectations: optimizing international payments is a process that needs periodic review as the company's volume and geography change, not a one-time fix.

Manually comparing terms from several payment providers can take significant time. Platforms like mangomundi let you compare rates, fees, and settlement speed from different providers in one interface, which makes the initial analysis easier — the final decision should always be based on the company's actual payment structure.

Frequently asked questions

Can optimizing payments really make a noticeable difference to working capital? The effect depends on the company's international transaction volume and frequency. For companies with regular, significant currency flows, the effect can be quite meaningful; for companies with occasional small transactions, it's more modest, but still worth attention.

Does this require a dedicated treasury team? Not necessarily — many of the steps described (comparing providers, matching payment and receipt currencies) can be implemented by a company's finance department without setting up a separate treasury function.

How often should the routes and providers used be reviewed? There's no universal rule, but any significant change is a good reason to review: increased transaction volume, entering a new market, or a noticeable shift in currency-flow structure.

Can a multi-currency account fully replace a company's bank account? Not necessarily — many companies use both in parallel, depending on the type of operation and the requirements of a specific country.

Conclusion

Optimizing working capital isn't limited to negotiating with suppliers and clients — how a company structures its international payments directly affects how much capital stays tied up in the settlement process. Matching payment and receipt currencies, using faster transfer routes, and regularly comparing payment-provider terms are concrete, actionable steps that can free up working capital without raising additional financing.