Handling exchange rates when completing business deals

Handling exchange rates when completing business deals

In a world where economies are more deeply tied to one another than ever before, it’s far from uncommon to find global business deals springing up left, right and center. Perhaps you have a supplier based out in a different country, for example, and you need to ensure that they get paid promptly. Or maybe you are the supplier, but your clients are based abroad. Either way, international business deals are common – and they’re great ways to access the world’s markets and potentially even make some cost savings.

But it’s not quite as frictionless as it might seem to an outsider – one major reason for that is the constant fluctuations in exchange rates which can make or break a deal. To a regular international businessperson, this sort of forex problem is all too common. This article will suggest some ways in which you can handle the problem and hopefully turn it around to your advantage.

Wait it out

One option open to you in this scenario is to simply wait for an exchange rate headache to pass. That could happen in the space of a few weeks, so it may well be worth waiting and setting up an alert for shifts in your favor. If you’ve made the cash abroad, meanwhile, another alternative is to invest it in that location and leave it there indefinitely. To do that you’ll need a bank account in that country. That, of course, doesn’t work if you need the cash there and then, to re-invest it, pay shareholders or do something else in your home country, it’s likely to not be worth the effort.

Focus on fees

Sometimes, however, there simply isn’t an effective way to tackle the problem of exchange rates. It may be that fundamental or technical analysis suggests that no dollar market reversal into your favor is on the cards any time soon, for example, or it may be that you simply can’t wait another month to make the transaction or to dip into your foreign bank account. In that case, your best bet if you are concerned about the high costs of the transaction may be to focus on the fees you’d pay instead.Brokers often charge high levels of commission, so one way to cut the costs of your business deal might be to find the most cost-effective commission deal. You should always check transfer rates before going ahead, andusing comparison tools or tables can make this process fast and streamlined.

So while to an untrained eye global business deals might look like a win-win situation for all, in which there’s no friction or problems, that’s far from the truth. Grappling with the exchange rate is perhaps the toughest thing for a business leader running a global deal to have to do, and sometimes it can wipe out any savings made by going abroad. But it’s not all bad news: From focusing on fees to waiting for times to change, there are ways to effectively manage the problem.

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