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International currency transactions: your questions answered

Businesses venturing into overseas markets need to understand how best to make and receive payments in different currencies.

Below we answer some of the most common questions being asked about international currency transactions.

How do multi-currency business accounts work?

Businesses that trade across borders normally need to hold accounts in more than one currency, or face the costly process of constantly converting money to and from Sterling.

Multi-currency accounts are intended to simplify this, by enabling businesses to manage all their day-to-day business banking and international money transfers in one place.

They make it easier for businesses to be paid in one currency and pay bills in another. They also enable businesses to move cash between currencies to take advantage of currency fluctuations.

FairFX’s latest innovation the new international business account Fair Everywhere, allows SMEs to receive funds from abroad and keep them in a business current account with euro, dollar or Sterling wallets.

How do high street banks differ from alternative providers?

A survey of small businesses by consultancy Accourt in 2016 found that more than 80% of UK SMEs didn’t know the true cost of foreign exchange through their banks. It found that a lack of transparency in charges meant that small firms paid banks nearly £4bn each year in hidden fees.

Fair Everywhere offers international payments at ridiculously good rates and without hidden fees. Its business account is 60% cheaper vs average costs of the top five high street banks.

How are exchange rates calculated?

Exchange rates are in constant flux, according to the market forces of supply and demand.

Added to that, the actual exchange rate you can get will also vary according to which bank or money transfer provider you use.

Online money transfer companies usually display their exchange rates. But make sure you check the exact rate and fees applied to the amount you intend to exchange before actually making the transaction as there may be hidden fees. High street banks often won’t show you the exact rate you’re getting or the fees you’re being charged until you start transferring money from your account.

And make sure you don’t leave too much time in between comparing providers as the rate may have changed.

How can I minimise currency risk?

There is a lot you can do to protect your business from currency movements.

If you are a British company with customers overseas, make sure you invoice them in Sterling wherever possible. That way, they absorb the currency risk and conversion costs.

If this is not an option, consider which currency to invoice in, whether you’ll get paid in advance, the payment method and whether your business has the facilities in place to receive the currency.

If you know you need to buy or sell currency at a future date, consider forward contracts. These allow you to lock in a current rate for transactions up to one year in advance and draw from the agreed amount to make transactions throughout the year at the set rate. This insulates your business from unexpected losses, although you could also lose out on unexpected gains.

Other tools include stop-loss orders and limit orders, enable you to set the upper and lower rate limits that you’re happy to buy and sell currency at.

Using a multi-currency account can also help reduce your exposure to volatile rates, as you can hold onto a currency until the exchange rate is more beneficial.

See our guide on 7 things to consider when managing currency for business.

How safe is my money?

To make international currency transactions, be sure to choose a reputable business that is regulated by the Financial Conduct Authority. Authorised business must keep your money separate from other company funds. You can check a firm’s authorisation on the Financial Conduct Authority website.

Check the organisation you use keeps your money in segregated accounts. That way your money will be safeguarded if the business were to stop trading.

 

Fair Everywhere makes it much easier to do business at home and abroad. And our fair fees and ridiculously good currency rates will make a big difference to your bottom line.

Find out more

 

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Miles Hobson

Miles Hobson

Miles oversees marketing communications at FairFX. He has a passion for travel and loves to explore new cities on foot to find their hidden gems.

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