The ultimate guide on international payment methods for businesses

Is your business expanding globally?

The opportunities for doing business abroad have never been more lucrative.

One of the most important factors to your success abroad lies within how you send and receive money between different currencies – it can seriously make or break your business.

In this article, we cover everything you need to know about exchanging money overseas as a business.

Are you part of a business that trades internationally, or planning to expand overseas?

If so, you’ve come to the right place.

How to transfer and receive different currencies in your business can seriously impact your bottom line, and long story short, it pays to be savvy with how your business transfers money.

Trade agreements have made doing business internationally more accessible than ever, yet many businesses are struggling to take the leap as they deal with currency exchange headaches.

Every potential country that you are looking to do business in has its own set of challenges and opportunities. However, in this article, we are going to cover the three most important fundamentals of money transfers in business so you can get the best results on your exchange.

Firstly, we will dive into the importance of understanding the impact smart money transfer practices can have on your business.

Secondly, we will discuss the risks that come with money transfer in business, and how you manage these risks.

And thirdly, we will look at why some of the larger players in business have been successful with how they transfer money.

The importance of money transfer in business

Firstly, it’s best we highlight the direct correlation between how you transfer your money as a business and the direct impact it has on your bottom line.

Ensuring that your business pairs with a reputable and trusted money transfer partner is one of the most important things you can do, particularly if your business is going to be dealing with overseas suppliers, customers and partners.

Most businesses will turn to their bank as this is often the easiest way for them to transfer money between currencies. However, while this might be the easy option, it’s going to be costly.

Often your business will be looking to send or receive large sums all at once, and the banks will charge you an exchange rate that’s well above the market midpoint, and more expensive than the exchange rate you would get from a money transfer provider.

Alternatively, your business might be dealing with small but very frequent sums when transferring money to or from another currency. Doing this with the banks will also be costly, as they charge a transfer fee on each transaction.

Whether you’re transferring large or small sums of money, making your transfers with the banks will eat into your profit margins and potentially put you into the red.

The risks of international money transfers for business

Secondly, it’s important that you understand the potential risks of transferring money as a business. Now, we aren’t saying this to scare you off doing business internationally! We’re simply highlighting a few factors that you need to consider, making sure you mitigate the risks your business faces when transferring money.

For starters, foreign exchange (FX) risks are based around the potential fluctuation in the exchange rate your business receives. The exchange rate you receive on your money transfer can impact your profits in a big way.

When it comes to FX risks, there are two main types of risk that you need to be aware of when you transfer money as a business.

1 – Transaction risk

Transaction risks arise anytime a business is buying or selling an overseas product or service. If the currency of the seller appreciates prior to the settlement of the overall transaction, the buyer will now need to pay more than they expected on this transaction.

Simply put, as the exchange rate went up in the country of the seller, the buyer will now need to transfer more money than expected.

Transaction risk commonly in agreements that are set out over a long period of time. Being aware of this by working out a contingency in your agreement is a great way to mitigate this risk.

2 – Economic risks

The second major risk of transferring money into a different currency in business is based around economic factors. A businesses overall value can be directly impacted by external government regulations, geopolitical issues and other localised factors around the currency you need to transfer to or from.

While these factors might not harm your business directly, they will still cause the currencies you trade between to fluctuate.

For example, major political events like Brexit or the US presidential election had big impacts on the AUD vs the GBP/USD. In the case of Brexit, when the leave vote originally looked it was becoming more likely, the GBP went from around 0.5100 GBP and then traded at 0.5525 later in the day.

How to transfer currencies like the major players in business

Knowing the risks we just mentioned is important, but you don’t need to worry. There are many businesses cashing in on the overseas trade that were once only operating domestically, and it’s simply a matter of managing these risks and being smart about how you trade currencies.

No matter what size your business, the following tips will ensure that you transfer your money in business just like all the major players.

Secure long term rates:

If you’re regularly transferring a large sum of money overseas, it’s possible to lock in a long-term exchange rate to ensure profits and peace of mind. You can ask us a BFX Money Transfer anytime to find out how you can do this for your business.

Negotiate contracts that factor in FX risk:

We touched on this earlier – the businesses that are successful overseas ensure that all their agreements account for fluctuations in the FX rate.

Make fast money transfers:

One clear way to mitigate FX risk is to simply organise your transaction to be made as fast as possible. Doing so minimises your chances of being struck by unforeseen changes in the exchange rate, and it’s always good business practice from a cash-flow standpoint.

Stay informed:

This one is obvious, but there’s no shortage of information online around exchange rates and the news that will potentially have an impact on your international business. Knowing as much as you can about the culture you trade-in will always be helpful.

 

Summary:

Doing business globally has never been more accessible

Ensuring you partner with a reputable money transfer provider is vital

Successful businesses mitigate FX risks

Money transfer is simple when you know the tricks of the trade

 

It’s clear that doing business globally has never been more accessible for businesses, especially if you have a trusted money transfer provider on your side.

Being able to exchange currency easily, and at the best rates possible is a clear way to help increase your profits as a global business.

While transferring money has never been easier, knowing the risks involved are important to ensure you capitalise on the best exchange rates possible.

And lastly, having the knowledge of when to transfer your money, and the important cultural nuances of the country you will be doing business with will only help you on your way to success.

Are you looking to transfer money as a business?

BFX Money Transfer is a dedicated money transfer provider helping people and businesses exchange their currencies at great rates. Sign up for your own free account.

BFX Money Transfer is regulated in Australia as a designated remittance provider with the Australian Transaction Reports and Analysis Centre (AUSTRAC), remittance sector registration number: IND1000519571-001. Australian Company Number (A.C.N) 611 376 820. Member of LEI Identification Number 5493001WDPYLPVM7RZ80.

Copyright 2019 BFX Australia All right reserved.