Businesses of all shapes and sizes that deal across borders require access to reliable and cheap products to handle all their currency needs. The old and outdated method of walking to the bank has now been replaced with cheaper online foreign exchange services for businesses.
Why Every Business Needs A Foreign Exchange Service Provider
The rapid rise of e-commerce service providers like Shopify makes it possible for any entrepreneur to establish a global presence online. Shopify handles many of the back-end complicated aspects of running a global business so you can focus on what matters most: marketing and selling your product.
Shopify’s platform gained in popularity over the years for its ability to help entrepreneurs grow their business and transact across different currencies. It has never been easier for business owners with a compelling product to tap the global market and increase their revenue many times over. Gone are the days when entrepreneurs are limited to their home market.
Suppose your Australian-based small business completed in-depth research and identified your product can sell well in the United Kingdom. To help establish a new presence, an online marketing campaign on social media outlets might be the best course of action to target new customers half the planet away.
Importance Of Saving Money
After selecting a social media marketing agency in London you will need to pay your first invoice in their national currency, the British pound. Paying through your Australian.-based bank or walking into the branch with the invoice in hand is among the costliest options available.
Banks are known to not only inflate the exchange rate but add hidden fees to unsuspecting business owners.
Instead, online foreign currency providers can handle international invoices at a much better cost. Several online foreign currency providers are able to offer a cost that is very close to the real mid-market exchange rate.
The process of signing with a foreign exchange service provider for your business is simple and involves filling in a few forms and verifying your identification. Most providers will be happy to guide new business customers along the application process through an online chat or over the phone.
How To Guarantee A Fixed Exchange Rate
Suppose several years down the road, your small business has taken off in multiple countries including the United Kingdom, Canada, New Zealand, and Japan.
Your small business now requires a detailed business plan and budget, perhaps looking as far out as five years. While global enterprises have in-house access to foreign exchange advisors and strategists from the leading investment banks, you are essentially on your own.
What impact will Brexit have on your small business in three years? Will Japan’s recession last longer than expected?
These and many other important questions could impact the cost of doing business in foreign markets. If your small business operates under a high volume and thin margins strategy, an unfavorable 10% currency fluctuation over time could wipe out your profit if you can’t make up for the higher cost elsewhere in your business.
Online money transfer services offer small businesses a unique feature that hedges out nearly all currency risk through a product called forward contract. A forward contract is a contract or agreement between two parties to buy or sell a currency with each other at an agreed-upon price and at an agreed-upon time.
This would allow a small business owner to know today what exchange rate they will pay in the future, be it one year or five years away.
The process of entering into a forward contract is straightforward and an option most money transfer service providers offer to their business clients.
A security deposit typically ranges from 10% to 20% of the transaction amount and will be required upfront for new customers. The transfer provider will hold on to the deposit in trust until the pre-agreed upon transaction date is reached.
The one downside to forward contracts is that a small business owner won’t be able to take advantage of favorable foreign exchange fluctuations. But this is by design as a small business owner sacrifices potential gains in exchange for protection against potential losses.
Bottom Line: Do Your Research
The financial technology (fintech) evolution over the past 10 years or so has resulted in dozens of foreign exchange transfer providers. Each one tries to differentiate themselves from their competitor rivals and this typically bodes well for clients.
It is important to shop around with multiple service providers to find the ideal match for your businesses’ individual wants and needs. Perhaps you are willing to pay a slightly higher fee in exchange for a better level of customer service.
As your small business grows in scale and size, many online transfer platforms offer discounted rates or other value-added services like a dedicated corporate FX dealer.
You know what’s best for you and your business so taking the time to do the proper research will prove to be an investment that pays off.