International exchange can be a turbulent and unforgiving environment, especially if you are unsure of the current health of the market. Even when something looks sure, misunderstood or mistaken advice can end up costing small business owners thousands of pounds.
Aside from the inherent risks involved in currency exchange, there are a few ways for companies to save or even make money on the market.
First of all, it is important to realise just how you want your money exchanging.
Many businesses use banks, which is a secure way of exchanging money, though at the same time, it can be costly. This is because many banks will charge a flat fee for every transaction, which can be between £30 and £50.
The alternative is for investors to look into trusted brokers who will exchange large sums of money without charging a fee. Brokers such as 4X Currency offer exchange services without charging additional fees for their services.
So what then?
Once you find a trusted broker for your company, you can then look to find the type of exchange that will better suit your business needs. There are three primary types of exchange rates:
Quite possibly the most popular form of exchange rate, a spot rate is an immediate exchange of currency that is based on the current rate of the market.
This is great for businesses that need to exchange money as soon as possible or find that the required exchange rate is healthy.
A forward contract freezes today’s spot rate, though the money is not exchanged for an agreed length of time. This can be a good option if the customer suspects that the strength of the rate will not last until the day of transaction.
On the other hand however, they may lose out if the exchange rate changes for the better in between agreeing on the contract in it coming to fruition.
A limit order is very similar to a forward contract with the exception that the deal is not completed until an agreed exchange rate is reached on the market. This means that businesses can make money on better exchange rates, though they run the risk of losing the money if that rate is never reached.
What else to look out for
It is quite traditional for some brokers to exchange currency via the telephone through an agent, and although this is considered fine, many of the new brokers now choose to deal via online, digital platforms.
This means that customers are able to visually asses all the information without having to rely on mediatory information from a sales advisor; creating a picture that is a whole lot clearer.
It is also important to bear in mind that if a broker uses a dealer during financial exchange, those costs will also have to be taken into account, meaning that the costs for the customer may well be higher.