An expert explains foreign exchange and how your small business can save money
Today, many companies sell their products or services across national borders, or make international purchases, or both. And this means dealing with foreign currencies. But few small and medium businesses are familiar with the ins and outs of foreign exchange. That means SMBs are at particular risk of losing money on these transactions. We spoke with dedicated foreign exchange expert Alexander Youngman of GPS Capital Markets, B2BeeMatch’s trusted sponsor, to get a sense of how it all works—and how your business can save money.
Read our questions and our expert’s answers to learn about how foreign exchange can impact your business’ bottom line!
What is foreign exchange and why is it important?
FX, FOREX or foreign exchange is the market for trading international currencies. It is where companies buy and sell currency depending on their operating markets or clients.
Why is it important for companies? The moment a company steps outside its home market, it is likely to be exposed to other currencies. Whether you’re importing from Asia, or exporting to Europe, or vice versa, you will be exposed to other currencies indirectly and directly, and these can ultimately have an impact on your business and the pricing of your products.
What’s the FX landscape? What are we looking at here, big picture?
For a business, the FX landscape is all about ensuring that the currency movements do not negatively impact your business profit margins. It’s something that’s often easily and quickly forgotten for a lot of business owners. When purchasing goods, you’re agreeing on a price, but delivery and payment don’t occur until 30, 60 or 90 days later, generally. In this period alone, the markets could move in such a manner that it erodes your ultimate profit.
Why are people at a disadvantage when doing FX through big banks?
To say they’re at a disadvantage is theoretically not true, as the banks can do anything they want. They simply don’t! Banks have realized that the big money for them is in multinationals that do millions a day. It’s not in the small and medium businesses that may do a million a year. The result is that small and medium businesses don’t get the service, the facilities, the products, the advice and the prices that they deserve.
Talk to us about transparency. Why do big banks have hidden fees, and what makes it possible for you to be transparent? Also, how can you afford to charge better rates?
In essence, the fees are hidden because banks can make more money that way. If a client isn’t aware of costs or charges, it’s easier to increase them. We break down the transaction, explaining the costs and impacts of the market moves. I want to make sure my clients know what it is they’re getting.
Why are we cheaper? We can charge better rates because as a business this is our sole focus. We don’t spread ourselves into other markets. We specialize in foreign currency, so our overall operating costs will always be cheaper than those of a bank. Equally, we are happy with less. I always consider it a win-win-win situation. The client is happy as they’re saving money, we’re happy as we’re still making money, and the fruitful relationship is the big win, as all parties benefit.
Is there a threshold at which it makes more sense to use a brokerage, or is there no transaction too small?
Ultimately there is no transaction too small. There is no business too small that we can’t help. The same applies for big businesses. Even if you’re doing 100 million or 500 million a year, we can still help, and we will make a difference compared to a bank.
What options do small business owners have once they decide to start using you for their FX transactions?
Endless possibilities. We have a huge range of products available—from simple payments to multiple currency accounts to products that help with balance sheet fluctuations. The nature of the product very much depends on the business and the complexity of currencies. For example, are you operating in multiple countries and need multiple currency accounts? We offer over 20 different currency accounts. This means that you don’t need to open 20 separate accounts in different countries. We hold all these accounts for each country and allow you to manage all this through one single portal.
What’s the difference between doing a transaction by speaking with a broker, such as yourself, versus using the FXpert app that GPS offers?
This is much more a level of personal service. If you’re on the move and need to do a quick payment the app is very easy for this. However, if you have a larger payment which you’re more sensitive about, or you’d like some market advice or thoughts on timing, then I’d always suggest speaking with me directly. I find the human touch offers clients the confidence to transact as it gives them a better understanding.
You say that you tailor your services to small businesses. What does an SMB need that a big corporation doesn’t, or vice versa?
The biggest difference that I find SMBs need is flexibility. Large corporations have millions coming in and out at any one time. SMBs face a bigger issue with cash flow. Sometimes a payment is late and you’re then short of cash or need to delay your own payment—we offer clients that flexibility to manage the payments without the stress of banks chasing for funds.
Any final thoughts on foreign exchange you’d like to share with our small business owners?
The financial market has developed immensely over the past five to 10 years. Previously, it used to be everything under one roof, having all your accounts, your insurances and loans managed by one bank. Nowadays the market has shown that there are so many better and cheaper alternatives available, and more digitized companies that offer far better service. This is what we’re here for. We don’t plan to disrupt your banking relationship; however, we are here to show you that there are better options available in the market. All you need to do is find us!
If your company does international business, be sure to register for a free one-on-one consultation with Alexander Youngman of GPS Capital Markets here.