3 Simple Steps To Better FX Rates For Your Business, Forever

Tony Crivelli
August 16, 2021

In the world of foreign currency and cross border payments, SMEs are the worst off every time and frankly, I’m tired of it.

In my 25+ years working closely with SMEs, their needs and knowledge gaps on the subject have stayed the same and unfortunately, so have the significant losses that come from poor or no foreign exchange strategy. 

Last year alone, a whopping average $32,500 was overspent on foreign exchange rates by SMEs - this would never be the case for large corporations, and it's overdue for change. 

FX issues affecting SMEs 

There’s a lot tied up in the knowledge and motivation void when it comes to SMEs and their international payments, particularly as so much is in flux, like rates, business goals, individual opinion.

At the same time, so much remains dependent on the style of each business and its owners. This means it’s different for everyone, at every stage. 

It’s definitely not a one size fits all, or even a few, when it comes to managing and planning foreign currency. This only adds to the complication and high task of understanding it all. 

Unhelpfully, the foreign currency market has become even more volatile over the last decade and to add to that, every other year we have various socio-economic and political events that shift the currency market further. Things like the Trump victory, Brexit and the Covid-19 pandemic have caused seismic changes in one single day and figures show there’s been an average annual move of about 20% in the AUD and 14% in the GBP. This sort of volatility can effectively wipe out one year’s profitability for a small business. 

While business owners understand their most obvious needs with foreign currency - better rates that reduce their costs – my experience has shown me time again they’ve never prioritised taking the time to understand and define what a better rate looks like for them, let alone planning how to get it.

I understand why, but it’s time for change now. 

What SMEs can do to get a better FX rate 

The most important step is to look at what you’re doing with foreign currency and reframe its importance in your business. If you’ve read this far, it probably plays a big part and deserves more attention. 

Here’s a brief breakdown of the steps for some decent analysis of your existing currency strategy. 

Step 1: Who are you using for your foreign currency? 

Using just one provider, which likely will be your bank, is a problem. In 2020, the loyalty tax on SMEs exclusively using their banks saw them paying on average 10x more than their corporate counterparts for foreign currency. Using multiple and different types of providers keeps things honest and well rounded; I’d recommend a spread of one bank, one broker and a fintech business. 

Once you’ve got these, make it a good habit to get a quote from each of them every three months. 

‘Am I using the right providers for this invoice?’ 

Growth is huge for SMEs. Doing $20,000 one month to $200,000 in the next means the business needs to evolve and change too. By continuously questioning ‘am I using the right providers for this invoice?’, you’ll be getting more out of your sales. 

Step 2: How are you getting your foreign currency? 

Hoping you get a good rate on the day of your payment doesn’t make for a strong strategy. But, buying little and buying often is. The idea - and goal - is to achieve an averaging effect to smooth out the substantial peaks and troughs in the market to really make your business resilient.

When going to your providers, remember it’s a marketplace: knowledge is power and it’s all about leverage. It’s important to know beforehand exactly how much you need and what rate you need it at. 

Remember, you’re not asking for ‘the rate’, you’re asking for ‘their price’. There’s a difference. 

Step 3: What am I risking with my foreign exchange? 

Those first two steps will get you in good stead quickly, but the best gains come to the business with a long term plan. 

Foreign currency is intrinsic to your business’ success, so your plan has to start with what matters most to your unique business. 

The best plans address these three business risks first before they finally set a goal for their FX plan. 

Risk 1: Your customer. How quickly can you change your pricing if your costs increase?

Insight: You risk losing market share by changing pricing too often. 

Customer loyalty is a two-way street. Much like we would prefer consistent income figures, the customer also wants this in their purchases. As your pricing changes to account for currency fluctuations, it’s likely your customers will move on to those whose prices are stable, leaving you at high risk of diminishing market share in your sector. 

Risk 2: Your business margin. How much of your FX risk are you willing to absorb? 

Insight: When you hide your losses in your margin, you’re reducing the sale value of your entire business by a multiple of 2 to 4 times that amount. 

For many, absorbing the fallout isn’t a conscious decision and if it is, it’s not often considered a choice when it comes to foreign exchange. As with all things associated with the bottom line, we only want the best but hiding FX losses can seriously reduce the overall value of your business and have negative long-term repercussions affecting external investment, strategy and planning. 

Risk 3: How much change in the rate can you and your business stomach? 

Insight: 90% of business owners risk way too much and then panic buy currency at a worse rate

Fear and business don’t mix well and I’m sure in all other facets of your business, your risks are limited or they’re at least far more calculated. This comes back to the lack of expertise and time that SMEs have in the realm of FX affecting more than just a “less than ideal” rate on a single month’s invoice. 

After understanding your risk, develop a strategy that reflects your business objectives and strategy, as well as the style of you, the business owner. If you’re not comfortable with it, it won’t work.

Optimistic words to finish

I get it, dealing with foreign currency is hard, time consuming and the rewards aren’t always instantly felt. Your situation changes as does the market so it can feel like you’re continuously peddling on the spot. But the good news is that we are in a different age now, one of better technology and more automation. 

Currency Score, for example, gives you the analysis of your past and present currency strategy. By connecting your Xero account, in less than five minutes you can see:

  • how much your bank’s mark-up has cost you
  • the average exchange rate over the past 12 months
  • the savings (or losses) you’ll make if you continue as you are

Never has this insight been made available for SMEs with results showing so quickly and effortlessly. 

Having this sort of relevant, tailored data means you can now properly kick start your own review of foreign currency using facts and data that is unique to you and your business. It’s simple, fast and affordable.  

Take back some control of your FX spend, get the insight that’ll affect action and then put the change into place. Once you see your Currency Score and the simple charts and stats it comes with (minus the jargon), you’ll be empowered to make the type of impact you want on your business. 

So, let’s keep this simple. Get the analysis done so you can get saving with Currency Score.


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