Are you a startup with operations based in Australia or New Zealand? If so, keep reading!
The impact of Stripe fees on overseas transactions
When Australia and New Zealand-based startups use Stripe as their payment gateway, they get charged foreign exchange (FX) and settlement fees. This is because international transactions are settled in the company's local currency (AUD or NZD). These extra fees impact the startup's bottom line, making it an essential consideration for your startup accounting playbook.
Four options to minimize fees on international transactions
Startups have several options to minimize FX and settlement fees. Each option has pros and cons, which you should consider before deciding.
1. Create a new entity overseas
This path allows you to get a local bank account with a payment gateway, resulting in lower settlement fees and no FX. If you do this, there are additional legal and tax complications. For an early-stage startup, this could be costly and a distraction. Defer this until it's absolutely necessary.
2. Adopting a hybrid approach per region
Some payment gateway providers allow you to settle in your local currency, but the conversion rates are terrible. Depending on your volume, you can look to switch to an alternative like Adyen, but you must reach a minimum revenue threshold before they will work with you. Analyze each region and use different payment gateway providers, optimizing for price.
3. Negotiating rates with Stripe
Contact your Stripe account manager, and you can negotiate a rate reduction. Again, you'll need to reach a minimum threshold before they will consider reducing your settlement and FX rates. Be aware that if your goal is to create a new entity and eliminate FX fees in the near future, the account manager won't be motivated to reduce your fees. Align your incentives to create the best opportunity to reduce costs while maintaining your relationship.
4. Maintain the status quo
The potential savings might only justify the transition costs once you operate on a larger scale. Model different scenarios and calculate the return on investment (ROI). It will take you only a short time to evaluate if it's worth delaying this for 12-24 months.
CFO Playbook: Accounting for Startups
Having proper accounting controls set up before you scale is foundational to your CFO accounting playbook. In this example, it starts with separating the transaction, FX, and settlement fees. Without this, you are blind and don't know how much you are paying.
How a startup CFO can reduce spending
In conclusion, effectively managing and minimizing international settlement and FX fees with Stripe is crucial for startups seeking global scaling. Startup CFOs and accounting practices play a significant role in navigating these challenges while identifying other potential cost-saving strategies.
SaaS management is another area that causes finance teams problems in a startup because it's hard to identify where the saving opportunities exist. Luckily, Hudled can do this for you without the overhead. Get started for free with Hudled and request a SaaS audit.