As a small business owner considering expanding your company internationally, it’s likely that foreign currency exchange rates may be the last thing on your mind. It’s more probable that you’re contemplating other factors, such as how to export or import the highest quality of goods for your business, how much travel you can expect to make that happen, and how to foster excellent relationships with your vendors. In addition to those important things, keeping the international currency exchange rate in mind can help boost your bottom line.
Is Forex Trading for My Small Business Really Necessary?
The currency exchange market has always had a high rate of volatility, and volatility has grown in the past few years. Fluctuations in currencies have become the new normal as uncertainty about the social, economic, and political landscape of a number of countries has grown. If you have a robust base currency, or the currency you currently have, when you move your capital offshore or pay for imports, you get more for your money. By keeping an eye on market trends and forex exchange rate movements, you can transfer your money overseas at a lucrative time.
Managing Your Company’s Foreign Currency Transfers
Doing a little due diligence and research by talking to foreign currency exchange providers and traders until you identify one that meets your requirements proves the simplest way to manage your forex transfers. This also helps you make online currency exchange transfers in a cost-effective manner. Some entrepreneurs decide to use their banks international currency transfer services, but currency exchange brokers can typically secure a better exchange rate for your company while simultaneously introducing risk-management strategies.
Moreover, a good broker keeps you informed of the most recent market movements. Some brokers even provide services that banks can’t offer, such as the ability to fix a favourable forex exchange rate for as high as two years before you make a trade. When choosing a path for your small business, consider the frequency and size of the currency transfers you need to conduct plus the manner in which you plan to protect your company from foreign currency risk.
Hedging Your Currency Exchange Risks
You may want to consider using forward contracts, or financial instruments that lock in a previously agreed-upon price over a specified time period. Forward contracts particularly help small businesses such as wine importers that put out prices months before receiving their wine. While you have to pay a commission for the contract, you get peace of mind in return. Furthermore, firms such as the Associated Foreign Exchange usually charge commissions of less than 1% of the forward contract’s transaction price. Locking in a forex exchange rate may limit your upside, it also ensures your business doesn’t lose money on account of movements in the foreign currency market .
Paying attention to what’s going on in the countries with which you do business can help you improve your chances for success. While you can do this on your own, finding a compatible currency exchange broker can save you both time and money and QuickBooks Online can help you keep track of each transaction. 4.3 million customers use QuickBooks. Join them today to help your business thrive for free.