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Reviewing your company’s financial transactions is an important part of ensuring the efficiency of your business practices. A closer look at historic financial transactions often reveals unnecessary costs in the form of transaction fees. Unnecessary costs can be most evident when a company assesses their international financial transactions. FX strategy is often overlooked, and can become an “accidental” practice, with a company automatically transferring currency internationally through their bank, rather than exploring other methods of international money transfer. The fact is, a proactive FX strategy can save company money and it is important to periodically assess your company’s FX strategy. This can be done by conducting a currency audit.
A historical currency analysis, sometimes referred to as a currency audit, allows you and your company to assess the impact of your currency strategy on company finances. A detailed currency analysis reviews previous international payments, both sent and received, and provides data of past currency performance. This information allows your company to assess any losses that may have occurred.
FXcompared offers a free Currency Analysis tool. The Currency Analysis tool compares the past typical bank rates of an international transaction to the past typical rate of a broker or currency specialist. The Currency Analysis tool uses FXcompared Intelligence’s historical data on typical bank rates in order to provide the analysis to the user - an index known as the IMTI™. The currency analysis tool allows the user to look at multiple past transactions, checking actual historic exchange rates to assess your previous currency strategy.
Using FXcompared’s Currency Analysis tool is easy. Simply enter the amounts sent and/or received, choose the currency and enter the date.
You can enter multiple transactions, allowing you to see the performance of your currency strategy over longer periods of time, further helping you to determine whether or not you should devise a more advanced currency strategy to maximize potential for savings.
Example Currency Audit Report
Example From the FXcompared Comparison Tool
How to Choose a Currency Specialist
If after performing a currency analysis, you decide to begin working with a currency broker or specialist, it is important to research the various options available to you. Particularly if you can see you could have saved a substantial amount, you will be able to choose from a list of specialist providers who will be able to help you. Several factors should be considered when choosing a currency specialist. It is important to research what currencies are offered by various brokers. The transfer fee and the exchange rate should also be taken into account. It is also important to consider how quickly a transfer must go through, as some currency specialists can move money faster than others. A search using FXcompared’s comparison service will help you find a broker that fits your needs.
FXcompared Intelligence recently interviewed Siamac Rezaiezadeh, the owner of www.mysalesadvantage.com, a sales strategy firm that works primarily with start-ups in the development of sales strategies and client acquisition.
“I reviewed the books and realised quite how much I was losing out on when taking payments in foreign currencies. This was both in terms of payment fees and FX - it didn't feel right and I thought that in this day and age there must be a better way.”
Siamac had an “accidental” currency strategy, meaning that he resorted to using his bank without considering other options. While reviewing company numbers, Siamac realised that his accidental currency strategy was not working in his favor, and undertook his own currency analysis. Siamac came to the conclusion that transferring through a bank was minimizing his profits. Read more about his experience below.
FXcompared: What currencies do you send and receive money in?
Siamac: AUD, GBP, EUR, USD is what I need to be able to support (at a minimum) with Saudi Riyals soon to join those ranks.
FXcompared: What made you decide to employ a different strategy in regards to currency exchange? Was there a specific incident that occurred, or was it a decision you reached after going over the books?
Siamac: I reviewed the books and realised quite how much I was losing out on when taking payments in foreign currencies. This was both in terms of payment fees and FX - it didn't feel right and I thought that in this day and age there must be a better way. I want to keep the ability to invoice my customers in the currencies they are used to, but without incurring unacceptable costs.
FXcompared: What made you choose to engage with World First as opposed to other currency specialists?
Siamac: They have a great reputation in the market for both business and personal users. I sought a few personal recommendations as well and they were frequently quoted positively. Their Mr. First ad campaign that runs throughout the Tube in London didn't harm them either.
FXcompared: Did you previously use a bank?
Siamac: Only insofar as saying "here are my bank details for you to make payment to". The user experience is solid (I don't have to do anything really and my customer just transfers as they would ordinarily) but I was still losing more money than I could in the currency transfer. It just wasn't really something that I wanted to continue.
Linda Nagamine is the Founder and Head Designer of EZ Living Connection LLC. Her company produces joyful keypers, a device to attach keys to a handbag. The keypers are manufactured in China, and Linda frequently transfers money from China. We interviewed Linda about her own currency analysis and why she decided to stop transferring money through her bank.
FXcompared: In terms of currency transfers, do you solely deal in USD to RMB? If not, what other currencies have you dealt with?
Linda: I only deal in USD to RMB.
FXcompared: For how long did you use bank wire transfers? What made you decide to switch to PayPal?
Linda: I used bank wire transfers for seven (7) years. In 2008, when I opened my business, the flat rate fee was USD 25 to send funds up to USD 5000. About 4 years later, the fee increased to USD 50. When the bank fees increased, a personal friend who travels to and from China for business offered to help. He sent payments on my behalf to factories via his online China bank account and I reimbursed him in RMB to cover the payment amount and bank service fee.
Although this arrangement worked well for a few years, I wanted a method that was handled entirely in-house. Fortunately, PayPal opened their service of sending money/payments to China in 2015. There is an intermediate partner on the China side (LianLianPay) that enables China PayPal users to withdraw RMB to their bank accounts, including currency conversion and bank deposit services. They convert funds from your PayPal account into RMB using the official exchange rate by Bank of China. There is no additional currency conversion fee. The exchange rate is decided by Bank of China at the time LianLianPay converts the funds with them. Small businesses like mine can definitely benefit from using alternatives to banks for transferring funds internationally.
FXcompared: You say that PayPal generally takes 3 days. How much longer did bank wires take compared to PayPal?
Linda: Bank wires would take 3-5 days and required sending a fax (seldom used these days) to my bank or stop in to make the transaction in person. In contrast, PayPal can be done online at any time, 24/7. The recipient in China can receive funds usually in 3 days or less.
FXcompared’s Currency Analysis tool can assist you in the assessment and development of your currency risk strategy. Perform a currency analysis on your company today, and take advantage of the unique data that FXcompared’s intelligence division researched and produced to see how your performed and how much you may be able to save.
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