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Tips for Foreign Exchange payments and risk

Tips for Foreign Exchange payments and risk

Current as of November 2016

 

The World of Foreign Exchange and International Payments can often be a minefield for SMEs. Fluctuation in the Aussie dollar, reactive rather than proactive providers and archaic processes/payment platforms all pose their own problems to today’s business owner.

Below are some of the common issues business owners come across, as well as some easy to follows tips for your FX risk.

Be aware of FX risk

Over the last 10 years AUD/USD has had on average a 16% range on a 12 month calendar basis. This obviously poses an ongoing and significant risk to the profit levels of any company that needs to buy or sell the AUD.

By speaking to an expert about a robust hedging policy, companies are able to hedge against this, therefore protecting a budgeted rate of exchange, as well as in many cases increasing profit versus the budgeted levels.

Be aware of different products

Too often businesses are uninformed about their options. The FX Market is far more wide ranging than just an online platform and basic Forward Contracts. Being unaware of all of the products potentially at a business owner’s finger tips could leave a company with a totally ineffective hedging strategy.

Below are some examples of these effective hedging solutions.

Take advantage of technology

End of month and monthly payment cycles regularly fill Account Purchase (AP) departments and management with dread. As the old adage goes “time is money” and in this case it rings true. Often a drawn out and laborious manual process, there can be nothing more frustrating or cost-ineffective for an AP department, than having to spend hours entering payment after payment.

Smart payment solutions that integrate not only with operational processes, but with users’ busy lifestyles, are essential to reducing AP costs and streamlining workflows for today’s business owner.

Example 1

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Example 2

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Example 3

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In summary, it’s imperative to speak to an expert in the field, as they will be able to offer not only a full suite of hedging products, but the expertise and experience to develop a robust, but flexible hedging strategy that aligns with specific needs and requirements.

Article written by our guest writers, Aaron Jackson and Alessandro Borghese at Cambridge Global Payments.

 

DISCLAIMER
This newsletter has been produced by Stanley & Williamson as a service to its clients and associates. The information contained in the newsletter is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this newsletter, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under Professional Standards legislation. 

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