Use a specialist to guide you through the exchange rates maze

Business Insights
19/07/2017

Romeo Radman, Managing Director at Payments Etc, which deals with Corporate Foreign Exchange and International Payments, reminds us of the importance of shopping around for the best rates – and why a specialist can offer more attractive deals than the high street banks.

There’s a world of difference between changing money into another currency when you’re off on your annual trip to the sun, and when you need to do it for business.

Often, we’re quite happy to sacrifice a little on our return, in the form of the exchange rate we’re offered, in return for the convenience of being able to change our money as late as possible, so that we don’t run the risk of getting confused by having to carry more than one currency.

But of course, the companies offering currency exchange facilities know this only too well – and will often offer inferior rates at their port and airport outlets to those you’d get on the high street, and certainly what you could find with a little shopping around.

The same goes for when you’re moving money and handling transactions in more than one currency as part of your business – except that the more transactions you need to make, or the larger the amounts you’re looking to exchange, the bigger the ‘hit’ you could face having to take.

And the more regularly you need to buy and sell in different currencies, the more likely it becomes that getting an inferior exchange rate and service will start to have an adverse effect on your business’s bottom line.

So if you’re expected to pay for goods or services in euros, dollars or any other currency, what are the options open to you?

First, regular foreign payments are best conducted not through a high street bank, but rather through a specialist in currency exchange. Today’s technology means such companies have access to the same technology and systems as the banks, and therefore process international payments just as quickly as the big banks.

Not only that, but if you need more regular access to foreign currencies, they can also offer ‘forward contracts’, whereby the rates at which you can exchange currencies can be secured for up to one year in advance.

It’s because they can offer these more sophisticated services that a foreign exchange specialist could be better able to meet your needs for transacting in other currencies than a mainstream bank. Such specialists also offer the same immediate payments facilities as their bigger, better-known counterparts. They also have the advantage of offering local payments services, meaning that your beneficiary will receive the full value of your payment. Very often payments made through mainstream banks incur deductions by the receiving bank.

How big can the difference in what you get for your money be?

Well, it’s not easy to give exact figures, but let’s take some rounded figures, and use them as an example. If you’d wanted to buy goods in euros in summer 2016, and had left your currency purchase to the last minute, £1 would have been equivalent to very nearly €1.17. Wind forward a year, and £1 is now worth nearer €1.13.

That might seem a small, even insignificant, difference. And certainly, if you only carry out a handful of transactions in a year, then it won’t be a massive factor. But what if you need to make transactions on a daily or weekly basis?

That’s when keeping a close watch on fluctuations in rates, and considering using the services of a foreign exchange specialist, can be a viable option for your business.

Like you, they can’t say that they have a crystal ball to enable them to see which way exchange rates will go, and where they will stand at any point in the future. But a reputable foreign exchange company will analyse your previous currency transactions, and pinpoint where it might be possible to make savings.

There are also a few foreign exchange companies that can tailor-make payment processes that fit the exact requirements of your business. Together with information they will gather from you on matters such as your existing payment processes and management of foreign currency invoices, they will formulate bespoke recommendations that fit your exact business needs and do the time-consuming data entry work on your behalf. Therefore, even within the corporate foreign exchange sector there are a number of alternatives available to your business, so it’s best to consider carefully your options. If you’re dealing regularly with overseas customers and suppliers, a willingness to conduct your business in their currency will help persuade them that you are being transparent with them.

Make your corporate currency payments a way of improving your cashflow and thereby your profits – call on someone with the right expertise, and you’ll soon be able to bring greater confidence, and insight, to your dealings with your overseas customers and suppliers.

 www.paymentsetc.co.uk