Sulis Staff Writer
Foreign Exchange & Making the most of International Supplier Payments.
As the saying goes: a penny saved is a penny earned.
Never is this truer and more pertinent than in the case of paying for your products from an international supplier that requires payment to be made in a foreign currency.
When importing, paying in US Dollars, Euros, Rupees, Yen or numerous other global currencies is standard practice; but the exchange rate at which you secure these international currencies against your hard-earned British Pounds is another and far more important consideration.
You want to ensure that you are able to secure the most competitive foreign exchange (forex) rate available on the market, that also suits your specific requirements. As such, every business that imports goods must take into consideration a number of key issues when making transactions in foreign currencies.
The most important of these are:
Foreign currency transactions are sensitive to fluctuations in the live exchange rate. The price you agree with a supplier on one day will rise or fall in real currency terms (i.e. GB Pounds Sterling vs currency in which the goods are to be paid for) as the forex rate changes. This is especially true in the current economic climate with the uncertainty surrounding Brexit, where currency exchange rates are fluctuating on a daily basis with every parliamentary session or news report regarding the Brexit process - making it more difficult to predict long-term patterns and keep track of exchange rates’ movements.
If you're importing products or components quoted in a foreign currency that form part of product ranges that you're selling in GB Pounds Sterling, you'll need to decide how to price those goods for the local market whilst maximising your potential profits at the same time.
Forex Tools & Strategies
Sulis Import Solutions, in consideration of each our client’s unique financial and budgetary planning requirements, utilise a range of Forex Tools to provide you with market-leading Forex Rates for international payments of your ordered products and components. This is not only of great benefit in terms of maximising your profit margin but also provides peace-of-mind in terms of securing some of the lowest costs of goods and components available on the market at the time of transaction:
SPOT Contracts: if you need to make an immediate international T/T (Telegraphic Transfer) payment, a ‘SPOT’ purchase of your required currency is placed. This is simply the exchange of one currency for another at the current market price.
Forward Contracts: a Forward Contract allows you to fix a rate now for a date in the future, sometimes up to 2 years ahead. This means that the rate is fixed, regardless of exchange rate movements, thereby protecting you if the exchange rates move against you. They are essentially a hedging tool, designed to protect your business against downside risk and assist in long-term budgetary forecasting.
The forex rate at which you purchase a Forward Contract will be slightly less competitive than a SPOT Contract, but that is due to the long-term security that you are gaining by forward-purchasing your foreign currency over a number of months ahead versus purchasing a foreign currency that needs to be immediately applied to make a payment (i.e. a SPOT Contract).
Before confirming and placing an order with your supplier, we will discuss which of these 2 forex purchasing strategies are best for you and your business’ requirements and the difference that each strategy would have on the budgeted finalised landed costs of the goods versus the different risk profile of each strategy, ensuring your complete peace-of-mind when authorising and making international payments to your suppliers.