Why payment automation matters

The key factors fueling the growth of a translation business are its sales & marketing efforts and its production scalability, where payment automation plays an important role. While the efficiency of the payment process is often neglected at the early stages, it quickly becomes essential when your business starts growing.

You can start a language service provider (LSP) business with just a few suppliers. But as you grow, you start working with dozens and then hundreds of freelancers, each completing several jobs a month. So you will need to calculate accruals for several hundred jobs every month and then pay using the suppliers’ preferred methods. By that time, you will probably need to hire several employees to handle the whole billing and payout process.

As the volume escalates, billing and payouts become a bottleneck in your workflow. While you may perform well in sales, marketing, and translation, you may be making little progress due to inefficient billing and payouts. It is therefore essential to automate these processes if you want to advance to a level where you can comfortably manage hundreds or thousands of suppliers and customers around the globe.

Another significant growth barrier is receiving payments from customers abroad. In countries with less developed financial markets this process can be problematic for both sides. Customers have difficulties making wire transfers to these locations and may choose US- or EU-based vendors just because they are easier to pay to. On top of this, the costs of compulsory currency conversion and commissions for crediting the money into their local account can be quite high.

We talked to thousands of Smartcat users around the globe and found a way for you to avoid the usual pitfalls, grow faster, and become more competitive by automating your payment operations.

The best practices below outline seven key processes that LSPs can automate to increase efficiency and raise their bottom line by up to 50%.

1. One payment to all your suppliers

The challenge

One of the biggest pain points LSPs experience is having to contract each freelancer or LSP separately. You need to properly handle and keep track of all these agreements and deal with hundreds of monthly transactions. As a result, you waste dozens of hours every month just making payments to all your suppliers.

One solution is to open legal entities in different countries and/or opening accounts in currencies other than your own. But how many legal entities can you reasonably open, and how much will it cost?

How Smartcat solves this

With Smartcat, you sign just one translation services agreement with us and pay one invoice that includes payments to all your suppliers hired during that period. You can set your payment terms, so you don’t have to change your payout procedures. Smartcat automates your payouts and paperwork with each and every individual freelancer or LSP.

This change alone will have a huge impact on efficiency especially if you already have dozens (and counting) of active suppliers.

2. Pay anywhere at local rates

The challenge

If you are lucky enough to be based in a developed country and make payments within its borders only, transaction costs may be relatively small. But if your payment process encompasses more than just a couple of countries with favorable conditions, you will inevitably spend up to 5–10% just on commissions for money transfers. And you might not clearly see how the money is distributed, as analyzing these transactions takes even longer.

Payout methods also considerably affect the final commission fee. Handling many at once multiplies the amount of paperwork even more. Besides, new fintech platforms pop up every year, and you have to stay up to date to keep providing relevant payout options for your freelancers. But worst of all, almost every country has their own, local e-wallets, which many local freelancers prefer over generalist options.

How Smartcat solves this

Smartcat has multi-currency bank accounts and local legal entities around the world and uses fully digital payment methods to transfer money between countries. We offer you better prices than those offered for standard bank transfers, resulting in cross-border rates of as low as $1 and even less for domestic payouts.

Smartcat also supports many payout methods, and freelancers can choose the most convenient for them based on their location and circumstances. This includes SEPA payments in the EU, ACH in the USA, as well as many e-wallets around the world. We add new payout methods every week to keep your freelancers happy so that you don’t need to think about payouts at all.

3. Paperwork cut by 95%

Transaction costs exclude time spent negotiating agreements, processing received invoices, and actually making the payments, each with its own payment method. It’s easy to forget, ignore, or just have trouble calculating these additional costs. You estimate payout costs as mere direct transaction costs and then wonder where the margin has gone, when in reality you could end up spending up to 30% in transaction costs and “dealing with paperwork” combined.

How Smartcat solves this

With Smartcat, you simply pay once using your own payment terms, and you are all set. The rest is automated within Smartcat.

4. Guaranteed legal & tax compliance

The challenge

Different countries treat tax issues for payments from companies to individuals differently. The same is true for payments made across borders. All these taxation differences in dealing with freelancers are obsolete practices coming from decades ago when business was not as global as it is now, and companies didn’t work with remote freelancers as much as they do today.

In the translation business, if you want to grow, you have to deal with several language pairs, so you have to work with freelancers from multiple countries. On average, only 10% of people involved in a translation company’s operations are in-house employees, the rest being freelancers from around the world.

But the differences are still in place and you don’t want your accounting team to waste time studying taxation and compliance risks. To operate efficiently and at scale in these circumstances, you must have a transparent and unified process for mass payouts to all suppliers across the globe.

How Smartcat solves this

In Smartcat, you don’t have to worry about the taxes and forms for each payee. And you don’t have to keep changing your legal and financial frameworks to keep up with the never-ending changes in tax laws in different countries.

Maintaining one agreement with Smartcat is easy and transparent. And you always know you are fully compliant with taxation requirements.

5. Fast supplier onboarding

The challenge

Onboarding new suppliers has never been easy. They tend to ask many questions before they agree to your terms and conditions and are ready to start their first real job. Your vendor managers need to review supplier rates, discount schemes, and payment terms and methods, so they end up with even more paperwork. Sometimes you end up losing a successfully tested supplier that you really wanted in your team. These problems tend to come back even if the first stage was successful: Suppliers change their financial and business information all the time, and you use up more resources with each new supplier on board.

How Smartcat solves this

In Smartcat, you just delegate onboarding to the platform and forget about it. Suppliers are happier too. They have all their data available and manageable online 24/7, can view the terms and conditions, and have a variety of payment methods to choose from for each country.

Based on our experience with LSPs in different countries, up to half the time spent on vendor management goes towards supplier onboarding and subsequent reconciliation of terms and conditions. The other half is usually spent on searching for and testing suppliers.

So by removing this from your workload, you make your VM team twice as efficient.

6. Automated cost calculation

The challenge

Billing is time consuming if your PMs have to manage all project statistics and calculate the amount due to each supplier manually.

They usually do it in a spreadsheet or a TMS system and can’t automatically track jobs being performed by suppliers. So they have to do it every time something changes, and in a translation project things change all the time. The number of payable words may change after completion due to TM matches. Some suppliers might be unable to finish their assignment by the deadline, so PMs have to add more suppliers and recalculate the initial word count. And so on, and so forth.

How Smartcat solves this

In Smartcat, calculations are done automatically while the job is being completed. You have full transparency and certainty of how much you owe any supplier at any given moment.

You always have everything you need to plan your cash flow. And suppliers can track how much money they have earned in a certain period.

This usually releases up to 10% of the workload from your PM and accounting teams. And this is huge when you recalculate it as earnings!

7. Easy payments from customers

The challenge

It is not always as convenient to pay a service provider abroad as it is in your own country. This is one of the reasons why buyers often prefer to deal with local LSPs.
There are countries where this issue is especially challenging, and paying/getting paid may be both difficult for the customer and expensive for you. Conversion into local currencies, outrageous bank commissions for crediting money into your account, and even more paperwork– this is not something that helps you run your business efficiently or scale quickly.

The most obvious solution is to register and run your own legal entity in another country, say in the US, which makes financial transactions easier for you and your customer. Not a bad idea at all, but it requires some upfront investment, of both money and time, and this can turn out more expensive than the cost of the transactions themselves. It also comes with maintenance costs, and you don’t want your expensive US CPA to mess something up with your multiple freelancers from different countries. They are not always specialized enough to deal with suppliers from different countries. And you don’t want an even more expensive lawyer if something goes wrong with your taxes.

How Smartcat solves this

A more simple, reliable, and affordable way to do it is to have Smartcat as a partner to invoice your customers on your behalf, wherever and whenever you need it.

The beauty of this setup is that in addition to removing the hassle of receiving payments from customers abroad, it allows you to use the same money to pay your freelancers anywhere, eliminating an extra transaction.

This way you can double your efficiency compared to mere billing and payout automation.

Afterword

Some of our users reported that automating the six processes listed above allowed them to cut their total payment costs in half, resulting in up to a 50% EBITDA growth.

The efficiency gain gives you an edge over the competition in the region, accelerating your global growth.

How translation businesses can half their total cost of the payment process. With Smartcat’s automated payment solution, we need fewer staff for payments, which really helps us to reduce overhead labor costs. Also, we are able to transfer money abroad easily and quickly at a lower cost.
And our language experts now have the opportunity to receive money in at least three different ways with five different currencies including Euro, Dollar and Turkish Lira.

Gokhan Firat, Operations and Business Development Manager,
Localex Language Service Provider

Smartcat has a very convenient payment automation solution, especially if you have lots of freelancers around the world. It saves time, money, and the accounting is in a clear overview.

Matias S. Elsner, Managing Director,
DICO Deutschland GmbH