Foreign Exchange - Necessary Evil or Increased Profit Opportunity?
by Andrew Parsons on May 30th, 2007
In days gone by, if you were a large company you may have employed your own Financial Director to watch the markets, or maybe someone from your bank was assigned to your account to specifically deal with your overseas transactions. Small and medium companies were left to fend for themselves. When a payment had to be made to an overseas supplier, the bank was instructed to send the payment and deduct the currency equivalent from their account. This led to high charges and poor rates of exchange; but the market has changed. Independent traders offer not only competitive rates but a whole host of other services to make sure that even a company with a small amount of currency exposure can be kept informed and up to speed with the markets.
So everything is great for all companies…well no. Everyday I speak to people offering my services as an Independent Currency Consultant. No fees, I say; no contract, I say; are you interested in what I can offer you? No, they say, and why? Well usually it is down to the old syndrome of "better the devil you know", I’m staying with my bank. But why? After I have just proved that I have access to better rates of exchange and shown that they have no one person advising or looking after their account they still want to stick with their bank.
I cannot stress enough how much information is out there, it really pays to look around.
If you can find a broker you can work with they are worth their weight in gold; but be mindful there are some out there offering "fantastically" low rates, and sometimes this is just to get you in. Once you are settled the margins are increased and the rate you get is not as competitive. What you should be looking for is a broker who not only gives consistently good rates but is proactive with you, letting you know when significant changes are occurring with currencies that you use, giving you advice on booking forwards, how much and for how long, helping you make the most out of your foreign exchange and helping to change it from a necessary evil to an opportunity of increasing profit.