Whether you’re an IT reseller or a small IT firm with overseas clients, your business could be seriously affected by currency movements if left unprotected.
In the worst cases, entire profit margins can be wiped out by dramatic currency moves – and for consultants being paid by foreign clients, it’s important to protect the money you’ve worked hard to earn.
Watch out for hidden fees
Whether you’re an independent consultant trying to protect your salary, or a reseller looking to safeguard your profit, it’s important to look for the best deal when making any international payment.
Before transferring money, always ask about the fees – your bank could hit you with a one-off charge of over £20, while some specialist providers will lure you in with a brilliant first deal and rack up the fees once you’re in.
Seek an expert opinion
Banks aren’t always able to provide you with a comprehensive currency strategy, nor are they your best bet for a good exchange rate.
If you want to get a good deal on your transfers, head to a specialist – international payments companies use their own network of bank accounts, which allows them to offer speedy exchanges at great exchange rates, as they’re not hit by the high transfer costs international banks would charge.
Choosing the right strategy
There are a number of different kinds of payment to choose from – the three main types are forward contracts, one-off payments and limit orders:
1. Keep protected with forward contracts
Forward contracts are a great way of insulating your money from dips in the currency market. If you think today’s exchange rate is good, a specialist can lock it in for a transfer to be made later at a later date. So, no matter what happens to the exchange rate in the meantime, you can make informed business decisions based on the rate you’ve secured.
Forward contracts can be particularly beneficial to IT resellers, as it means you can enter into import and export contracts with confidence in your exchange rate.
2. Transfer quickly and easily with one-off payments
The downside of forward contracts is that you can lose out on an even better rate if the currency market improves in the meantime.
This is where one-off or “spot” payments are useful. Made “on the spot”, this kind of payment is perfect for fast overseas transfers that are needed immediately, or for business payments that have a slim profit margin and would benefit from acting quickly on a good rate.
As a result, spot payments are particularly useful for IT consultants that are being paid in a foreign currency by overseas clients.
3. Wait for the right moment with limit orders
If you don’t need to send your money right away, a limit order might be the right choice for you. With this kind of payment, you draw up a contract with a specialist, specifying an exchange rate at which you’d like to transfer – even if it’s not currently available. Once you’ve agreed this ideal rate, your specialist will wait until the market reaches your limit, and only then will exchange.
It’s a great way to budget, but its downside is that the timings are not predictable. This isn’t good for people that need their money regularly – like those converting a monthly salary. However, it offers resellers a chance to ensure they’re getting the best possible deal – a real bonus in an unpredictable market.
Ultimately, if you’re regularly transferring money between currencies, my best advice is to make sure you’ve got an expert onside who understands the currency markets better than you!
