How to Pay International Contractors: What's the Best Way to Pay a Foreign Contractor?

If you're wondering what's the best way to pay foreign international contractors, you'll get the answer here. Paying international contractors should be simple and is more relevant now with the rise of remote work.
*************************************
Additional Resources
• Can an international c...
• Best Systems for Payin...
• Bill.com vs. Gusto for...
*************************************
Need help with your startup’s bookkeeping? Kruze Consulting is a leader in providing low-cost, high-quality financials to funded startups. Learn more at kruzeconsultin...
#payinginternationalcontractors #howtopayaninternationalcontractor
Be sure to subscribe for more accounting, HR, and finance tips for your startup.
www.youtube.co...
MORE FROM KRUZE CONSULTING:
Website ► kruzeconsultin...
KZbin ► www.youtube.co...
Facebook ► / kruzeconsulting
Twitter ► / kruzeconsulting
We're recording this in COVID times, every company has gone totally virtual or remote.
So the first step I would say is make sure they're a contractor. So these people may need to be employees, especially if you're, you know, working with a bunch of people in one country, that country, you know, governments really love payroll taxes. And so oftentimes if you're building a big presence and they can argue that you have tax nexus, you may end up having to put them on payroll. You can use a global PEO to do that, but that's really the first test. Make sure they're actually a contractor and they pass all those tests.
Now, if they, if you have validated them as contractors, there's a couple really, really easy ways to pay them. My favorite personally is just using bill.com. I like bill.com because it allows you to upload the invoice the contractor gave you into bill.com and you can actually have some documentation, both for your own records and for your accountant. It makes booking all these contractor payments in the correct periods so much easier.
Also sometimes contractors are a little disorganized. They might try to double bill you or you pay them and they're complaining they never got the money, whatever it is. You can actually show the cash trail through bill.com and bill.com has international wires now so you can set all those, all that stuff up through bill.com. So that's the first option. Another option is paying your contractors just through the old fashioned bank wire. And in some countries that maybe don't have as developed banking systems, or maybe there's a high chance of fraud, then you do kind of, you do use a wire oftentimes, but that doesn't have the advantage of uploading the invoice and having that for a record, a couple other options are Rippling and Gusto.
Now Gusto is steadily making progress on this. They've got Canadian international contractors can be paid. One thinks that they'll probably have, you know, the rest of the countries, international contractors being able to pay through there. Rippling does allow you to pay contractors globally, which is really, really nice. There's also a couple kind of contractor-centric companies like Deel which is a new company, which allows you to pay your contractors and foreign employees in one place. They kind of have like abstracted the global PEO and so it looks like one interface to you, but the payments can go through a PEO or they can go through a wire or a different channel, but it all looks the same to you, which is a pretty nice option.
The other ways of doing it are good old fashioned, PayPal. Like people use PayPal, TransferWise, things like that. And then finally, maybe, you know, depending on how you're thinking, but like things like Bitcoin or Square's Cash app can also be an option. We are careful about Bitcoin because when you make payments with Bitcoin, that is a, it's a currency that is moving around quite a bit.
And so it makes the accounting a little bit harder, but if you only have a couple and they're the kind of people want to be paid in Bitcoin, that's an option as well. The key thing to remember is whatever way you choose the pay your contractors, you really need to have those invoices. The IRS requires you to keep three years of invoices at all times in case you're audited. And so you need it for that reason. You wanna make sure, it's gonna be impossible to track down these invoices if you're ever audited.
And secondly, to make your accountant like Kruze, work a lot faster and keep your accounting bill down. If we have access to those invoices, we can see the period for which the expenses should be booked and therefore we do not need to bug you. We can also see if you're being double billed. We can see if there was a deposit already made. We can answer so many questions on your behalf for those contractors and save you a lot of time.

[@KruzeConsulting]

Need help with your startup’s bookkeeping? Kruze Consulting is a leader in providing low-cost, high-quality financials to funded startups. Learn more at kruzeconsulting.com/startup-bookkeeping

[@Pcbdude82]

So I create films and I do photography. Lets say I'm in another country doing some shooting. And I hire local talent there. But my company is based in the US and I sell my products online. How do I pay the people and what exactly do I need to keep in my records?

[@Uncle_Yankee]

For a small business this is not practical advice. Global PEOs are exorbitantly expensive when you make less than $1000 per month with 2 or 3 employees. What should I do in this situation?

[@sumangunturu6271]

My friend has an LLC in USA and is trying to partner with an IT company based out in India but not sure how to pay the invoices and account for taxing and expenses. Any advice will be appreciated. Thanks in advance!

[@scottorn]

This sounds like a typical vendor relationship. So you would just collect invoices and pay. If it’s more of a strategic partnership where you are reselling their services, then a conversation with an accountant would be needed. Thanks.