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Guide to Business Currency Exchange for International Transfers

Whether you are a freelancer or sole-trader, small to medium sized enterprise, or global corporation, receiving the best value for your money when dealing with foreign currency will make a huge difference to your bottom line. In this guide we will explain the volatility surrounding currency exchange and recommend proactive ways to acquire the optimum business currency exchange rate for international transfers.

Updated: 25/01/2022
Read time: 4 minutes
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At a glance… 

Exchange rates dictate the amount of foreign currency that one currency can buy or sell; for example, the current exchange rate of GBP to USD at the time of writing is 1:1.3853799. The value of a currency will therefore affect the amount of money it can be exchanged for and this means any business trading overseas or making regular payments in a foreign currency should closely monitor exchange rate fluctuations, as they can affect the value of goods and services. 

In order to minimise risks when trading foreign currencies, we recommend keeping a close eye on the mid-market rate of your currency pairing. By doing so, companies can accurately gauge how closely your currency exchange matches the specific interbank or mid-market rate.

How does currency exchange affect international business transfers?

Predicting how the foreign exchange market will fluctuate is no easy task and understanding how currency exchange affects global money transfers is crucial for any business, big or small. Here we will run through how currency exchange rates are likely to affect businesses:

  • If a currency depreciates (decreases in value) it will make exports cheaper, benefiting the exporting business or company; the business importing the goods will face higher costs of imports as a result 
  • If a currency appreciates (increases in value) it will make exports more expensive and reduce the competitiveness of exporting businesses; however, the goods will become cheaper following an appreciation

Top 5 tips for business currency exchange

In order to avoid unwanted or unnecessary additional costs, we have compiled a list of our best advice for businesses engaging in foreign currency exchange. 

  1. Always be aware of the interbank/mid-market rate 

This rate is the midpoint at which banks trade currencies with one another. Here at MoneyTransfers we always recommend researching foreign exchange rates on a regular basis, when arranging international money transfers, in order to gauge the precise rate of exchange before accepting a currency exchange from a third party.

  1. Ensure funds are appropriately insured

Making sure the service provider you are trusting with your international business transfer adheres to all the regulatory security protocols is crucial. We cannot stress the importance of this enough, for both corporate and private clients: find out more about how to protect your money when sending funds overseas by reading our guide.

  1. Pick a provider who specialises in business transfers

It is best to choose a money transfer company who is well-versed in business transfers. Considerations that should be made ahead of setting up an international payment include experience of sending money to and receiving money from a specific destination, the currency pairing, your business’ requirements and the size of your money transfer. Read our guide to the Top 5 FX Partners for International Business Transfers here.

  1. Set a date for your currency exchange 

The value of your currency exchange is likely to fluctuate between the date of purchase to the date of sale. This is why some businesses make use of forward exchange contracts. By doing so, it is possible to set the exact amount your transfer will cost in advance, meaning you won’t have to worry about the exchange rate changing before the date you need to transfer your money abroad. Find out more about Forward Contracts here.

  1. Pay in your local currency if you can

If an invoice or payment is submitted in a foreign currency, there is greater potential for risk, as you may receive less money than expected if the exchange rate depreciates between the time the invoice was issued to the official date of payment.

However, issuing invoices in your local currency typically has a lesser impact because the recipient is responsible for changing their local currency into yours to make payment. Done properly, your business will receive the full invoice amount regardless of where the exchange rate sits.

Summary

Currency exchange rates can affect business transfers positively or negatively, directly or indirectly, depending on the finer details. The depreciation of a currency can impact the costs of goods and services and this will always impact the business’ bottom line. Whether you’re making small regular payments to overseas suppliers, or arranging an international transfer of a large sum of money as part of a business deal, we want to help our readers minimise risk. We strive to do this by offering our best advice on all areas related to currency exchange. The MoneyTransfers comparison engine has been developed with this in mind, and has been designed to give our customers access to the best available transfer options. 

Understanding Foreign Exchange Risk
Being on the receiving end of an undesirable exchange rate can be detrimental to any type of international transfer, no matter the size or destination country, but it is especially damaging to international business transfers that make regular mass payments. Foreign exchange risk, or FX risk, derives from the exposure of an organisation during international transactions in a foreign currency. This guide will help any company or business understand key risks and mitigate potential loss of assets.
Guide to Business Currency Exchange for International Transfers
At a glance…  Exchange rates dictate the amount of foreign currency that one currency can buy or sell; for example, the current exchange rate of GBP to USD at the time of writing is 1:1.3853799. The value of a currency will therefore affect the amount of money it can be exchanged for and this means […]
VertoFX
About VertoFX VertoFX was born out of a friendship between two entrepreneurial friends, Anthony Oduwole and Ola Oyetayo. The Nigerian-born, British ex-bankers set up the company in 2017, launching it in London’s financial district and establishing it as a fully regulated UK money transfer company. It is known as a currency exchange marketplace designed to […]
April Summers

April is a trained journalist and the Content Editor for MoneyTransfers.com. She has 10 years experience writing about a diverse range of subjects, from financial services to arts and entertainment. When she’s not writing about global remittances she can be found daydreaming about her next holiday abroad.