FX International Payments
CurrencyTransfer.com can be your partner in helping you navigate the world of FX international payments.
FX international payments have become a significant part of the entire business cycle with hedging strategies to guarantee the value of payments in their home currency.
More and more businesses are turning to foreign markets to both source raw materials and/or outlets for their products. The ability of firms to price their goods efficiently and ensure that payments are received in a timely manner is crucial in terms of both cash flow and profitability.
Managing FX Payments and Receipts
Prior to the opening up of markets to non-bank providers, Forex Money Transfer was seen as the remit of banks who provided “bundled” services to their customers as part of an entire trade finance package. This allowed banks to provide uncompetitive pricing to their customers which incorporated a letter of credit facility, FX and payment services and often a short-term lending facility.
New regulations have meant that banks are no longer able to bundle individual services and this has led to import and export businesses being free to “shop around” to find more competitive pricing for, in particular, their purchases and sales of currency.
The ability to price exports in foreign currency and know with certainty how much will be received in local currency can provide a business with a strong advantage and reduce the risk of selling goods overseas. Alternatively, knowing the amount that will have to be paid for raw materials allows your sales team to price their goods accurately for future delivery.
FX Money Transfer Strategies
Hedging the Risk
There are many ways in which the risk surrounding foreign currency transactions can be mitigated.
High margin businesses are sometimes inclined to risk a part of their margin to benefit from any currency fluctuation in their favour and CurrencyTransfer.com are experienced in presenting risk/reward analysis to businesses which illustrate the dangers of not hedging.
In most cases, it is pertinent to hedge every exposure 100% even though experience may have shown in the past that an opportunity was missed. No company ever went out of business by hedging their exposures but taking a risk on currency fluctuations is something that should be left to experts.
Managing Currency Risk
The board of directors of any firm looking to start to export their products or invest overseas will need to be aware of the risks involved in the entire process. They will use experts in tax, freight, local legal requirements but rarely consider the risks involved in currency fluctuation which could wipe out significantly more than the firm’s profit if left unattended.
Defining risk parameters, deciding on a hedging strategy and execution of that strategy should all be at the forefront of your considerations. The team at CurrencyTransfer.com are well versed at being involved from the ground level and can suggest the best way to hedge cash flows stretching out to a year and beyond.