We all know the immense amount of contribution that small businesses make to a particular country’s GDP, despite of their fairly less percentage among the total number of exporting businesses. In developed countries like USA and Canada the small businesses make up to more than half of the total exports in a financial year which shows the role that small business play in the highly volatile forex market. With power comes responsibilities and so it stays true for the small businesses who need to keep several things in mind when dealing in the forex market. There are several foreign exchange strategies that these small businesses can adopt to keep their resources and budget under control.
- Plan Ahead
You do not want yourself to be totally unprepared and without any information about your goals. Make sure you have a close look at what your business needs and build your plans accordingly. Money managing can be one of the major differences in weather a business will be able to generate profit or not. Making a plan not only provides you with a starting point to any task but also helps you to easily handle the daily ups and downs in the market.
- Spot Payment Strategy
Spot payments simply refer to when a particular currency is bought or sold immediately at the current exchange rates. This is done during the times when there are certain small payments or the currency needs to be immediately exchanged. Like the name suggests, spot payments take care of those small payments. For best results with spot payments, try to look for providers who charge low fees and compare their rates between various buy and sell spreads.
- Foreign Currency Account
If your businesses has constant dealing with a particular foreign currency it is often advisable that you open a foreign currency account. While not many small businesses give it a thought but having a particular currency in stock for international transactions always comes in handy and helps a business react more quickly to any sort of currency risks. If you constantly deal with cross-currency transfers, a foreign currency account helps you save time and inconvenience.
- Online Transfers
Internet is said to be one of the greatest human inventions after the Cold War era and has pretty much connected the world. Today in this internet driven age of technology, online buying and selling has become a reality. Thus, it is essential that businesses provide an easy and transparent way of making financial transfers. The best method to conveniently transfer funds from one account to another is online transfer or electronic funds transfer. This not just increases your payment visibility but will also make settling the various overseas invoices more cost effective.
- Use Local Currency With Overseas Vendors
Dealing with overseas vendors has several challenges, and you certainly do not add up to these problems with making payments in your currency. It becomes a little difficult for the various dealers to determine the tangibility of a certain offer when it is made in a foreign currency. Using local currency with overseas deals can also help you get a better discount from the dealers. The dealers always add up a certain percentage of the total overseas invoices to make up for the fluctuations in the currency prices which in turn increases the price.
- Currency Option
There are certain times when no matter how much you research, the market totally works against your predictions and the demand is totally uncertain. During such times it is best to consider the use of currency option. As the name suggests, if the prices of a certain currency goes in your favor you have an option of forgoing the deal and selling the position at the current price. Although you are supposed to pay a premium for this service, it can totally come in handy and provide you an edge over your competition.
We all are aware of the fact that Rome wasn’t built in a day and it takes years of hardships and constant string of profits that establishes a firm in the market. Being one of the most unstable markets in the world, it is important the small businesses follow the above tips when dealing with foreign exchange.
Rohit Agarwal is an avid reader of business strategies and several business and finance related books and literature. He likes to write about these topics on various blogs and websites such as forexstars and others during his free time.