UK businesses that seek to optimise their international payments need to consider the importance of a few key guidelines. Some of these steps are simply good common sense applied to a specific situation, while others require a broad understanding of securities markets. Together, they seek to help UK business owners improve their treasury solutions and make their business financially more stable.
Rule 1: Understand your needs
The first rule might seem simple and straight-forward, and yet it underpins the rest of the guidelines. In order to successfully organise commercial money transfer operations, business owners need to have an organised inventory of their payment needs. Invoices and payment orders need to be carefully sorted and kept track of.
Valid invoices need to have details such as the names, legal addresses and VAT registration numbers of both payer and payee, as well as payment details such as the amount due, currency that the invoice is payable in, invoice reference number, due date, as well as money transfer details, such as the payee’s IBAN number and their banking institution’s SWIFT/BIC code
By keeping your payment records organised, a business can keep their accounting staff to a minimum, while outsourcing their FX purchase and payment delivery needs to an expert provider like AccendoFX.
Rule 2: Plan ahead
In continuation of the same theme as rule #1, businesses need to plan their payment schedules in advance. Careful management of account payable is critical to a medium-sized business, but even individual entrepreneurs need to pay attention to invoices becoming due or suppliers that need to be paid to keep the business functioning.
But careful planning is not just a business concern. Planning a payment schedule in advance gives a business owner an opportunity to seek more favourable market conditions to purchase FX for their cross-border payments, as well as to contract an FX broker to facilitate transactions.
Rule 3: Partner with a broker
A professional FX broker is an invaluable resource for businesses that do not have their own in-house treasury departments. An FX dealer can offer an outsourced treasury solution at a fraction of the cost of staffing fully-fledged treasury and accounting staff. At the same time, they act as an experienced market specialist that can provide expert services, improve the business owner’s understanding of financial securities, adeptly time their FX purchases and get a favourable FX rate.
An FX broker can act as a trusted and reliable partner and provide a more personalised and tailored service than a big bank ever can. A specialist FX broker can be assigned to directly manage specific FX payments and guide the business through financial markets.
Rule 4: Know the market
Financial markets are complex and constantly evolving ecosystems and navigating their waters requires experience and professional knowledge that can be sourced from professional FX brokerages like AccendoFX. At the same time, financial markets have sets of rules and patterns that can be studied and harnessed. There are trends in movements of FX currency pairs that can be used to secure a favourable rate. FX brokers can time currency purchases to coincide with important macroeconomic announcements and use their analytical skills to properly sequence multiple currency operations.
Rule 5: Understand the service
Not all FX brokerages offer the same solutions, nor do they all have the same client management approach. Many compete exclusively on price, simply offering the lowest fees and commissions for their services. Others prefer a more nuanced approach.
Financial markets can have a very broad scope and to properly understand the complex inter-relationships between different factors that move FX currency pairs, many businesses require an analytical support structure that would offer deep knowledge of the markets and expert support to help execute international payment orders.
A comprehensive product offering would include not just a comparison of costs of FX brokerage services, but a full spectrum of information useful to the client, such as best FX rates, favourable execution timing, manageable fees, research support, payment facilitation and attentive client management.
Rule 6: Master the timing
Timing is key to securing a good FX rate and financial markets offer many mechanisms to execute currency trades and manage risks. These mechanisms include things like watch orders, take-profit orders and stop-loss orders that help business owners secure favourable FX trade while being prudent about their risk exposure.
In addition to spot contracts that allow market traders to buy and sell currency immediately, an FX broker can also help businesses set up forward contracts that fix a preferred FX rate at a desired point in the future. Such contracts are relevant for businesses that have long-term business plans that require significant capital outlays and want to secure a favourable FX rate today. A forward contract can last from anywhere between several weeks and 12 months and can help a business secure a specific rate today to pay an invoice in the future.
Rule 7: Beware of hidden fees
Transaction fees can be a costly part of traditional international money transfers and it is important for business owners to be fully aware of hidden expenses of transferring money overseas. Many traditional banks not only charge an unfavourable FX rate, but can also add extra mark-ups to the cost of transaction. Different types of international banks transfers can also incur different costs.
In the European Union, for example, interbank payments are governed by the Single Euro Payments Area (SEPA) mechanism that limits the fees that can be collected by banks for international money transfers, while in other parts of the world, transfer costs can significantly vary depending on transfer time and scheduling.
Working with a specialised FX broker like AccendoFX means that there are no extra fees. The price of transaction that is agreed beforehand is the final cost to the business and it covers all expenses associated with the payment support service.
Rule 8: Protect yourself
While selecting an appropriate brokerage to handle your treasury and payment solutions, it is important to be aware of safety and security of your money. Firms that provide e-money and payment services in the United Kingdom must be either registered, authorised or exempt by the Financial Conduct Authority (FCA) which regulates such services and defends the interests of consumers.
Business owners need to be aware if their FX broker is registered or authorized by the FCA and is subject to consumer protection regulations. AccendoFX is registered as a payment service provider in the UK.
Rule 9: Maintain control
While committing to working with an FX brokerage or payment facilitator, it is important to take charge of your business treasury requirements. FX brokers can provide a support structure that can facilitate market research, can execute FX trades or help set up payment transfers. But the business owner or manager still must remain as the driving force behind the entire mechanism.
For the system to work, the business must never lose sight of how their cross-border invoice payments are being handled, how they manage transaction costs and what tangible benefit they are deriving from working with a specialist FX provider.
Key decision making must remain with the business owner of manager, with the payments facilitator providing ancillary services to help keep the business running smoothly.
Rule 10: Be flexible
In the end, managing a business’ international payment needs is often all about adaptability. Business owners needs to weigh multiple criteria for selecting a preferred treasury solution to manage their international money transfers.
The art of picking the right FX broker often requires a balance of various business needs, including superior personal service, expert knowledge of financial markets, reasonable fee structure and technical capacity to execute both FX purchase operations, as well as transfer payments.
A business owner looking to outsource their treasury needs to specialist providers needs to be able to balance these requirements in a way that is suitable and appropriate for their operational needs. It is important not to focus on only one single criterion, like transaction costs or company size, and instead balance a comprehensive list of factors that will work together to allow UK business owners successfully manage their international payments requirements.