Over one in three SME businesses in the UK that conduct international business say that currency fluctuations as their overriding concern, yet more than half admit they do not manage the associated risks associated. By not protecting themselves against fluctuating exchange rates, businesses are potentially leaving themselves open to volatile market conditions.
Managing the risk associated with international payments enables businesses to better protect themselves against negative currency fluctuations and more importantly, to increase foresight and control.
Without the right guidance, managing international payments can be an intimidating, complex and time consuming process. American Express FX International Payments has developed some tips for businesses to manage risk and have more control when trading internationally.
Rocco Magno, Director of FX International Payments (FXIP) at American Express offers this advice:
It is important for companies to effectively manage international payments and protect themselves from dramatic currency fluctuations by taking control and securing exchange rates where possible.
Forward contracts can provide protection from currency exchange rate changes by locking in a rate over a specific period of time. Rates are determined when a contract is purchased based on the period of time chosen. Forward contracts help business leaders to manage and control their cash flow by locking in future costs.
This enables companies to see exactly what the exchange rate will be when paying for goods and services internationally, which not only minimises risk but also enables the ability to plan ahead more effectively. In today’s market this kind of foresight can really help companies gain the edge over their competitors.
Streamline payments for maximum efficiency
The world is getting smaller and companies need to move money around the world faster than ever before.
International payment specialists focus 100 per cent on their core business of foreign exchange, leaving SMEs to concentrate on what they do best. This helps streamline operations and gives opportunity to pass the rewards of these efficiencies to customers. The ability to make fast, efficient payments overseas can be a significant contributor to a company’s success.
Always familiarise yourself with the exchange rate
It is very important that companies are aware of the exchange rates and any variations when trading in the international marketplace. As we have seen over the last twelve months, these rates can vary dramatically making it even more important that businesses are in the know of the relevant exchange rates used when paying for goods and services.
Seek advice and support
To ensure the best possible foreign exchange (forex) provider to centralise your international payment processes. Look for companies that provide a high standard of customer support, proactively manage your account and offer you a named account relationship owner.
With these factors met you can build a trusted relationship with that service provider and ensure your time is spent on your core business. With the international marketplace growing and becoming more common practice for SMEs, it is important to seek the right advice, not only to minimise risk against factors outside of your immediate control but also to enable them to plan and grow your business effectively.