Our company (small business) is planning on selling products on our own website to Japanese customers. What's the best way to collect payments? We are looking at 1) using Paypal 2) opening a yen bank account in Japan 3) opening a yen bank account in the US. Should we use US dollar or Japanese yen? Please help.
Best way to receive payment from Japanese customers
Answers
Dear Director of Finance:
The currency
**For customer convenience price the product in Yen
**If you dominate the market you can price in USD, that having been said you will attract more customers if price in local currency, Yen
***If the currency of your cost is other than Yen, you will have a foreign exchange exposure you might need to hedge
***With plastic form of payment the collection cycle is only 2-3 days, so yo might be able to skip the hedging.
Payment tool
***Let the customer pay by credit card, debit card, local ACH
***Checks are not a common form of payment in Japan, plastic is better
***You did not speak of your volumes which are a factor
***PayPal is nice
****Have your merchant bank or PayPal take the Yen and give you USD
David
1
Hi David, thanks for your reply. We also believe charging customers in yen will be convenient. For debit card and ACH transactions, do you suggest that we have a bank account in Japan to receive payments? Are there any special things we need to pay attention to besides foreign currency gain/loss adjustment? It seems that we have to file Report of Foreign Bank and Financial Accounts to IRS. Any advice?
I think David laid this out nicely. I would only add that you should accept those payment options that make sense for your business. For example, if you are selling to consumers, ACH's may not make sense so you Paypal or credit card. If your customers are companies, ACH's and credit cards may make the most sense.
1
Patrick, thanks for your advice. As I replied to David, my concern is on having a yen bank account and sending money back to the US. What financial reporting and
Take care of Paypal, they charge 2.5% hidden fee on FX transactions (Yen to USD)
A "Report of Foreign Bank and Financial Accounts" form TD F 90-22.1 must be filed with the IRS, if the foreign bank account exceeds $10,000 in value. It is a simple 2 page form. In subsequent years it is very easy to fill out if there were no bank changes made, the only field that changes is the maximum value of the account at any time in the prior year. The same form is filled out twice, once for the corporation, and once for the individual who has authorization over the account.
As a Japanese, I would say the only way you can charge to Japanese customers is PayPal at this point if you company is retailer. If you can understand Japanese, there are all sorts of payment methods in Japan. But as long as you use only English, PayPal is the only way I believe.....
If the customers are used to using the internet shopping, they won't have a difficulty to setup the PayPal account, but some people still have a hard time to use the internet money transfer systems if they don't use PCs.
Wire transfer costs very expensive bank charge ($25-$100) which doesn't matter how much they pay. But if you are whole-seller, wire transfer cost may be cheaper.
It really depends on your business.
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FP&A