Today, businesses of all kinds realize that they need to look beyond their borders to boost their sales and further grow. To start, there are a lot of growth opportunities outside your locality that your small business can exploit. This includes getting new customers, partnering with other companies overseas, and even outsourcing production to help offset costs. Moreover, your business could be getting supplies from abroad or paying international remote workers.
All these international operations will require money transfers. But, when you transfer money internationally can be complicated, especially when dealing with currency conversions and exchange rates. And more so, when you don’t get these transfers right, your business may spend more money on forex exchange fees and eventually incur losses.
However, with a good guide, small businesses can get international money transfers right and may save on costs. This article discusses it in detail below:
#1: Check The Fees And Taxes
Some countries have taxes on transferring money into other countries, and some banks will also charge fees. Such fees include transfer fees, outgoing foreign currency conversion fees, incoming foreign currency conversion fees, and intermediary bank fees. You will want to compare all of these fees to see which bank or service will give you the best deal. Make sure that there are no hidden fees or taxes on the transaction.
Understanding these fees can help you make more informed decisions about the best way to send funds abroad. It can also potentially save you thousands of dollars in fees each year.
#2: Know The Exchange Rates
To buy and sell goods and services internationally, businesses need to be able to convert currency into another currency at a known rate. This conversion is facilitated by financial institutions such as banks or specialist foreign exchange brokers worldwide. And generally, the conversion rate can affect whether or not the transfer is worth it.
There are two types of exchange rates that you should be familiar with: wholesale and retail. Wholesale exchange rates are what banks and other institutions use to buy and sell a large volume of currencies. On the other hand, retail exchange rates are the ones most people see, which banks charge each other and their customers for those transactions.
In general, banks profit by marking up these exchange rates, so they may be higher than what you’ll see in an online quotation or forex brokers. Because of this markup, your bank or money-transfer provider must give you an accurate rate before committing to the transfer. If this is not the case, it may be time to shop around for another service provider.
Like all markets, foreign exchange rates constantly change in response to global events and economic conditions. They can fluctuate daily or even hourly, so it’s essential to keep up-to-date with current trends before transferring money internationally. This will help you see when the speed is in your favor so that you can make the currency exchange when it is right for you.
#3: Have A Multicurrency Account
If you have multiple currencies, managing your payment options can be complicated. The conversion fees and unfavorable exchange rates will eat into your money reserves. However, some fintech firms offer multicurrency accounts, which allow you to hold multiple currencies in a single charge. You can also set up direct debits and standing orders from this account. This is useful if you’re sending a regular invoice to an overseas customer.
Having a multicurrency account means you no longer need to worry about exchange rates or transfer fees when receiving or sending money abroad. You can also use your multicurrency account as a private or company savings account, and it’s especially useful if you find yourself having to send multiple invoices in different currencies.
#4: Consider A Commercial Foreign Currency Account
If your business engages in frequent international money transfers, opening up a commercial foreign currency account can also be an ideal option. These accounts can provide you with a convenient platform to manage foreign transactions. They can also offer advanced tools for hedging against price fluctuations and automatically converting between different currencies.
In addition, some of these accounts come with no monthly fees or minimum balance requirements. This can be beneficial for small businesses in managing costs.
Final Words
While transferring money abroad may seem like a highly complex task, a small business can still find a way to do it properly and conveniently.
With the right guide such as this article, you can find ways to work with favorable exchange rates, lower fees, and low taxes, which can help you save a lot of money in the long run.
