If you make international payments in your business, you’re aware of how high bank commissions and exchange rates can affect you. That’s why we’ll share our strategy and some extra tips to save money on your international transfers.
In many industries, having suppliers, marketers, or labor in another country can be more financially convenient. Despite spending less in this aspect, small and medium-sized enterprises (or SMEs) face the challenge of managing international payments in a cost-effective way. An important, but sometimes underestimated, aspect is the currency in which payments are made since the exchange rate is often more detrimental than estimated.
The exchange rate risk in international business
42% of companies are already using instant payments to improve efficiency and time, and an additional 68% plan to integrate them into their operations by 2025. When these transactions are automatically made in other currencies, they are exposed to the risk faced by these currencies. This uncertainty often affects profit margins. Furthermore, foreign suppliers almost always include a premium in their prices to protect against the fluctuation of their local currency, which increases costs for companies sending money abroad.
The solution to protect your earnings
By choosing to pay suppliers or employees in their local currency, entrepreneurs can have more control over the exchange rate risk and save money on their international transfers. This strategy not only allows taking advantage of favorable exchange rates, but it also means a reduction in overall costs, benefiting any business that makes international transfers regardless of its industry. And since the international payment market is expected to grow from $176.5 billion in 2021 to $238.8 billion by 2027, with an annual growth rate of 5.3%, more and more companies can benefit from it. By receiving payments in their own currency, stakeholders do not need to include an exchange rate risk premium, which translates into more competitive prices for the buyer.
More benefits of paying with local currency:
- Better relationships with suppliers or employees: Paying in their local currency shows a considerate approach towards the business relationship, which can strengthen trust and open doors to better terms and conditions.
- Accuracy in financial planning: By reducing the risk associated with currency exchange, companies can plan their finances more accurately and effectively, allocating those resources to something more profitable than a bank’s commission.
- Taking advantage of market opportunities: Operating in different currencies can position the company as a flexible and adaptive player in the international market.
Extra: Ten tips to save more money
Beyond what has already been mentioned, we share these ten tips that you can put into practice to care for and protect your company’s earnings apart from the area of international transfers.
- Expense audit: Conduct a detailed review of all the company’s expenses each specific period. This can help you identify areas where you can reduce costs without affecting the quality of your services or products.
- Negotiation with suppliers: Negotiate with your suppliers to get better prices or discounts for bulk purchases. Taking care of and maintaining solid (and long-term) relationships with them can lead to better deals.
- Optimize processes: Analyze your operational processes and look for ways to make them more efficient. The automation of repetitive tasks or the use of management software can serve as examples to save time and money.
- Digital marketing: Instead of spending on expensive traditional advertising, use social media and digital marketing to reach your target audience organically, more economically, and effectively.
- Home office: If possible with your business type, consider implementing the facility to work from home to reduce office costs.
- Efficient inventory control: Maintain strict control of inventory to avoid excess stock and waste. There are inventory management systems to optimize this aspect.
- Energy and sustainability: Implement measures to save energy in your company, such as using LED lighting and efficient equipment, which can represent significant long-term savings.
- Outsourcing: Consider outsourcing non-essential functions or those requiring specialization, as it can be more profitable than maintaining an internal team for certain tasks.
- Staff training: Investing in your employees’ training can improve efficiency and reduce costly errors. You can consider online training options to reduce costs.
- Evaluations and feedback: Conduct periodic evaluations of financial performance and listen to feedback from your employees and customers to identify opportunities for improvement and cost reduction.
Start saving money today
In conclusion, this strategy is useful for companies looking to optimize their international transfers. By reducing unnecessary costs and effectively managing exchange rate risk, businesses not only protect their profit margins but also foster stronger and more sustainable commercial relationships. At Jabiru Payments, we are committed to helping you with these important decisions, offering solutions that adapt to the specific needs of your company so you don’t have to pay commissions or unfavorable exchange rates.
Are you ready to save money on your international transfers?
Visit our website and discover how we can support you.