FC Exchange offers top tips on making the most of your money when exchanging currency. 

SMEs importing or exporting goods demand very different things from currency exchange markets, however, regardless of whether a weak or a strong pound benefits your business most making the right choices when you exchange currency is sometimes the only difference between profit and loss according to currency specialist FC Exchange.

Nick Fullerton, MD at FC Exchange, said: “Since November 2007 the Euro has strengthened by 13% against Sterling, an increase that puts great strain on profit margins, but it is during times like this that currency specialists can save you most money.

“Obviously we can’t predict the future and tell you how markets will perform but we have a wealth of experience and know which economic influences on the currency markets that you should look out for, which announcements will impact upon the markets and when you should not convert funds.

“Leaders of small businesses are experts in their field, they know their business inside out, but they often don’t fully appreciate how much the currency markets can impact profitability. Few know how currency brokers can help to safeguard their margins.

“Firstly you must be aware that your profits can be eroded by poor currency exchange but you are not entirely at the mercy of the markets. There are a range of products and tools, highlighted below, that can help you to get the most from your money when you transfer funds from one currency to another.”

Perhaps the most important thing to remember is that time is of the essence, if you haven’t spoken to a currency broker yet contact one immediately and start building a relationship. If a broker knows that you need to buy Sterling with Euros within a few months he will ensure he contacts you when the markets move in your favour or if there are dark economic clouds on the horizon that might impact your transaction.

If you need to make the transaction immediately you will still save money compared to high street bank rates but you are not allowing enough time for your currency broker to use the methods outlined below that can save even larger amounts of money.

Here are FC Exchange’s top tips for business currency exchange:

Plan early
Give your currency broker enough time to save you money. Don’t think it’s only for the benefit of brokers that you should plan and prepare well in advance, you need to have enough time to consider the different options your broker will suggest before choosing which one is best for you. Don’t rush into these decisions, it could cost you thousands of pounds more than it should by rushing the process.

Don’t rely on the bank
You may have a fantastic business relationship with your bank but don’t fall into the trap of thinking it will automatically give you the best exchange rate because of this relationship. High street banks are not currency specialists and cannot compete with Currency Exchange Brokers. The person you speak to at your bank’s currency call centre may not be an experienced currency trader and is unlikely to have the knowledge of the market your broker has.

Get to know your broker
The biggest problem faced by brokers is trying to get the very best for a company that has not given them much scope to make savings. Give a broker plenty of time to monitor the markets and take advantage of their expertise to save you money. If you contact a broker the day before you need your money, even though they could still offer a better deal than your bank, there’s not much they can do for you.

Forward Contract
A Forward Contract allows you to freeze the exchange rate for up to two years for a 10% deposit. It’s not about trying to guess when the market is right for you, identify when the rate reaches a price that allows you to make a profit and then eliminate the risk of that deteriorating by taking out a forward contract. If you want to set up a forward contract for £100,000 you pay £10,000 up front and the remaining £90,000 up to two years later.

Limit Order
With enough planning you can set limits to make sure you get the most out of the currency exchange markets. A Limit Order allows you to take full advantage of fluctuations and automatically buy or sell currency at a pre-determined level. Your broker will help you to look at the market and decide upon a realistic upper level that allows you to make the most of fluctuations without being triggered so soon that you miss out on the peaks.

Stop Loss
A Stop Loss is the opposite of a Limit Order – you agree and set a lower limit at which you are prepared to buy or sell a currency. If a currency loses value and you have set a stop at an exchange rate where you can still make a profit the transaction is automatically triggered once it reaches that rate.

Using a variety of strategies
There are many different ways of using these tools together. You could try setting up a forward contract for half of the return you expect to reduce the risk of having to buy more currency than you need, then set a stop loss at the minimum exchange rate you need to make a profit and a limit order at a level just above the current rates. Speak to a broker, they will explain different ways of maximising your return and limit exchange rate risks.

In summary
Don’t fall into the trap of thinking you are an expert at reading the currency markets, or completely resign yourself to the mercy of the markets because you can use a range of different tools to maximise your returns. Don’t make the mistake of relying on your bank; speak to a specialist currency broker early, they will provide you with information that could save you money based on their extensive experience of the currency markets. FC Exchange speaks to businesses every day that have already lost out on profits because they’ve used the bank or called a broker too late in the process. Act now and make sure your business doesn’t miss out.