A recent study has revealed that UK SMEs were overcharged £4,078,000,000 in 2015 when they paid for goods, services and talent abroad. Over the past 5 years, this cost has risen by close to a billion pounds thanks to increasing globalisation.
Many of these businesses are uncertain about how international payments (and the fees associated) can impact on their business. By gaining foreign exchange knowledge, these business owners could potentially save thousands. Here, we look at how.
Why Avoid Traditional Banking Methods?
The traditional banking sector has never been built to particularly support SMEs, per say. Regulatory red tape in the banking industry (worsened by the financial crash of 2008) makes it harder for SMEs to access essential services, such as finance invoicing or underwriting as large banks are unwilling to lend to what are perceived to be high risk businesses. This makes it harder for SMEs to raise working capital.
Additionally, they rarely offer foreign exchange advice to businesses, instead leaving them to fend for themselves when many SME owners have very little knowledge of the risks associated. This can make it hard for SMEs with high volumes of overseas revenue to stay profitable.
Finally, traditional banks do not have global payment solutions that specifically suit SMEs, meaning many are overcharged by high international payment transaction fees.
So, instead of using your high street bank, you may be better off increasing your foreign exchange knowledge and finding a different solution.
Why Expand Personal Knowledge?
By expanding your personal knowledge, you’ll be able to learn more about the ins and outs of forex trading and how you could help to save your business money. Forex trading can be difficult to understand, but educational videos can help you learn in your own time, without impacting on your business.
Additionally, by boosting your own knowledge, you’ll be able to consider scenarios where it isn’t necessary to exchange the currency as you could make more money by retaining it in the host currency. You could then potentially even use the forex markets to make even more money, depending on your own preferences.
Dedicated foreign exchange companies can also help you mitigate the problems listed above, as they often offer dedicated solutions for SMEs, lowering their risk by ensuring that they’re exposed to less volatility than they otherwise would be through things like forward contracts. This allows an SME owner to lock-in the price of a foreign currency that will be used to settle international payments.