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.
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.
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:
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.
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.
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.
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.
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.
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.
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.
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.