Small business owners are ever more likely to be working with a variety of currencies as technology has allowed even the smallest of enterprises to trade on the global market. But most banks often charge hefty overheads for foreign exchange for business.
Here’s our top 3 tips on how to avoid losing money on your company’s currency conversion.
Find a specialist multi-currency account
The overheads that banks charge for international business transfers have irritated many an SMB owner over the years. A natural progression from this has been a growing number of specialist multi-currency accounts.
These accounts aim to transfer and convert your currency at a fraction of the cost of the big banks. For example, Regent FE states it can save businesses up to 80% on transactions with its online business bank accounts. Larger company HiFx charges £9 per transaction under £3000, which is one of the industry’s lowest.
It’s important to shop around for the best option for your business, in many cases it is the smaller businesses that can save you money as opposed to big banks and known names.
If billing international clients, work to lump sum amounts
If you are billing clients, you can save money by waiting to be paid in one lump sum. More fees will apply if you send frequent smaller invoices, so the waiting game can very much pay off in this scenario.
In general the smaller the amount on a single invoice, the more money you will lose on transfer fees and exchange rates. If you normally bill on a weekly basis it is advisable to switch to monthly billing to lose as little money as possible. When possible invoice larger sums less frequently to maximise your take-home pay.
The additional benefit of this is happier clients: Less frequent bills mean less hassle on your clients’ finance department’s side. Plus, you ease the pressure on your clients’ cash flow; as more receivables are actualized, they are more than happy to pay your lump-sum invoice. A win-win situation, indeed.
Pay close attention to exchange rates
Exchange your money tactically, if you can afford to wait til the exchange rate has improved then wait. Keeping a constant eye on rates will help you to make the best possible financial decisions at the right time.
There are many online tools that can help you monitor rates, thus making it a simple solution if you are ever in doubt. If you have working knowledge of the the exchange rates over time it will be far easier to make the wisest FE decisions for your business and forecast where you think rates will go next.