SME international trade is growing by leaps and bounds, and so is the demand for affordable business foreign exchange. The majority of small and medium businesses today use banks to transfer money abroad or get payments from international customers.
However, this means they often do not have access to business FX (foreign currency exchange) services. These are mostly restricted to large corporations and VIP clients of banks. Therefore, SMEs are losing a considerable percentage of their profits to bank fees and foreign exchange costs.
Here, are three key tips SMEs can leverage to manage these risks and reduce costs on their foreign currency exchange:
- Negotiate for a good deal
In contrast to FX specialists, most banks offer a limited range of financial payment options. Traditional bank transfers, in fact, lack transparency or power over when a transaction occurs, resulting in most businesses having to accept the exchange rate at the time. It is therefore important for businesses to work with companies with business account managers and FX experts.
SMEs can organise their preferred exchange rates with an FX specialist in a few ways. Depending on the size or future volume of currency exchanges and transfers, one may be able to determine the FX margin on the exchange rate offered.
- Localize your business
Using a local bank reduces the FX costs a client may have to absorb when paying a company. By eliminating foreign exchange fees, a business will become more appealing to prospects in other foreign markets.
When considering money from a local perspective, keep in mind that political instability, economic downturns, and other major global changes, like the COVID-19 pandemic, can rattle global currency markets.
Money transfer companies that offer multi-currency accounts are a good way for businesses to prepare for possible circumstances that are beyond their control. Companies can save on marketplace FX transfer fees and take advantage of more substantial exchange rates at a later date by collecting and holding money from international customers and marketplaces.
- Everything is based on timing
There are a few key windows when FX profitability can rise or fall, depending on daily, weekly, and monthly trends. Taking the time to research and consider which times are most suited for business money transfers, as well as to determine if there are any that should be avoided, is essential.
When foreign exchange markets are closed during the weekend, some transnational money transfer businesses don’t offer weekend money exchange and transfers. Most of those that do, however, raise their fees to avoid exposure to closed FX markets.
Increasing profitability begins with reducing costs. Considering the unprecedented scope of the current recession, this is also crucial for business survival.
One method that is often overlooked is to use an FX company to reduce your foreign exchange costs. Under these circumstances, however, it is important not to disregard the savings it offers.