In today’s increasingly globalised marketplace, it’s more important than ever that you understand currency exchange rates and the affect they have in the business world. Even if your company doesn’t have any foreign branches or partners, the odds are that you have a competitor that does.
When a currency depreciates in value, exports from its home country become cheaper, which in turn tends to generate more business for exporting firms. But imports become more expensive, since purchasing 5000USD of some commodity will cost more when the buyer’s currency is weaker against the dollar.
What to do
Trying to keep up with second-by-second changes in exchange rate can be a headache, however, especially for an entrepreneur with lots of other things on their plate. So find a reliable source to keep you up-to-date on trends without your having to check the rates every few hours. Financial strategists and banks pay close attention to such things, so they are always a good first port of call if you need an idea of the currency landscape.
Now if you’re making exchanges in multiple currencies yourself and not just keeping an eye on the market there are a few things you’ll want to bear in mind. First, charge your foreign partners in their own currency. This is less to do with the numbers game and more a question of professional decorum—foisting all the work of dealing with exchange rates onto your customers will not paint you in the best of lights.
Banks can and will charge for currency exchange, either you will clearly know about the charge, or they will set their exchange rate as such, to make sure they make profit from the exchange. Using third party firms like CurrencyFair can help you save money, and make the payment a lot less hassle. You can also use a comparison site to compare rates from these firms.
What to Avoid
Don’t try to play the market in your deals. Rather than taking the risk of betting on when and how currency values will fluctuate, focus on your business itself and reliable gains. For example, agreeing an exchange rate ahead of time with foreign clients can save time and energy on both sides. Be careful, though; it’s important to check whether exchange rates are likely to change in a way that would put you at a disadvantage before the exchange, for example your own currency depreciating.
As long as you’re careful and keep your eyes open there are great opportunities in the international market so follow this advice and you should have no problems.
Have you had any experience with international payments? Let us know below.
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