5 ways to make more money…from FX trades
March 15, 2016 – Every business buying or selling currency needs to read this.
Our fool proof ‘Top 5 Must Do’s’ to make foreign currency work harder for business. Cost savings, time savings and efficiency 100% guaranteed.
Must do # 1: Agree a Pricing Structure
For years companies had no clue how much FX transactions cost them. They got an exchange rate and did the trade. But what is the difference between their rate and the market rate. The true cost. The spread. With more information available now, it is easier to know where the exchange rates are when a company trades. Use this to your advantage. Negotiate with your provider and agree a fixed spread upfront.
Must do # 2: Consider Different Payment Options
Sending money worldwide costs money. The faster the payment the higher the cost. The slower the payment the lower the cost. When you are paying for the speed of a CHAPS/ International payment you would assume the full amount sent would arrive with the beneficiary. Wrong…what do they say about making assumptions…? The mother of all….?! Routing fees and receiving fees mean less arrives. How about a payment that arrives in full and costs you less? ACH or SEPA payments are an alternative option. Simply factor in a little extra time as they can take up to 2 days longer to arrive.
Must do # 3: Group Together Smaller Payments
Economies of scale. One of the first things I remember studying at college (back then we would apply this to buying a crate of beer). Buy in bulk and unit cost decreases. Same applies to currency payments. Group together small payments in the same currency, achieve a better rate on the larger amount and save money.
Must do # 4: Set Budget Levels and Try to Beat Them
Companies know their breakeven point right? They know their profit margin on the sale of their products and services? So why, when I ask about their costed level or budget level when they purchase currency do I get the response “…we just buy when we need to…” or “…when we think it is a good level…” (one company who shall remain nameless buys on the 2nd Thursday every month because “…we’ve always done it like that…”). When calculating a breakeven point cost of stock is used. If stock is sourced abroad, changes in exchange rates directly affect costs. Setting a FX budget level should therefore be part of the forecasting process. If you can hit that level or above over the year great. Using a forward contract for 6-months at, or slightly above, the costed level offers certainty and protection. Being above would also generate a currency profit but remember the key here is protection, not making currency gains.
Must do # 5: Technology or Service or Both?
Financial Technology. Fintech. The media is awash with the latest disruptive technology to hit financial services and there has been significant investment into the sector; £357m in 2014, a total superseded by September in the following year. But, when it comes to moving money from one currency to another is a high tech faceless product what you need? Or is efficiency with more cost-effective service what you need? Do you need to know what the latest market trends are? Do you want to know what information is being released that will affect the exchange rates? Do you want to speak to someone and discuss your requirements? Do you want access to a range of currency products to protect you from currency risk?
Most businesses need both to save money – the convenience of an online, technology based trading platform coupled with expert guidance on how to protect the business by talking through specific requirements.
For a FREE trade analysis to see how hard your foreign currency transactions are working for your business contact Adam Cotton at SAT Worldwide on 01491 577550 or enquiries@satfx.co.uk quoting ‘FREE Trade Analysis’. No obligation. No lengthy forms to fill in. Simply send us details of your last 3 transactions to get a tailored strategy to make more from your FX.
Any questions or if you require support for foreign currency transactions please contact Adam Cotton on 01491 577550 or visit www.satfx.co.uk