Tips to Manage FX Costs When Conducting Business Internationally

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Companies that conduct business internationally know that having an FX plan and budget in place makes good money sense.  It allows businesses to predict fluctuations in currency and manage costs more effectively as they transact globally.  So, what’s involved in developing a sound FX plan?  Here are some tips for you to consider:

Step 1 – Start with an FX Budget Estimate

First, estimate what you plan to spend on exchange rates and transactions fees for the upcoming year.  If you conducted business globally the year prior, then calculating those expenses would be a good place to start.  Whether you have last years data or not, all calculations should align to your business goals and planned international transaction volume for the year ahead. 

Step 2 – Conduct a Currency Trend Analysis

A currency’s past performance is another area that contributes to your FX budget calculations.  Reviewing previous market activity acts as an indicator for future performance.  While not an exact science, conducting a 1 to 5-year trend analysis can help you estimate how that currency will perform in the upcoming year; allowing you to be more accurate when budgeting FX costs for your business.  Here’s Western Union’s latest currency trend analysis to get you started.

Step 3 – Future Global Events

Global events are another factor that causes currency fluctuations.  These shifts can be the result of economic, social or political factors.  For example, knowing when a foreign central bank plans to make an interest rate announcement; or, if there’s an upcoming election in a country where you conduct business, allows you to anticipate movements in currency around these events letting you plan your business costs and currency transactions accordingly.

With an FX budget in place, you’ll be better equipped to predict your FX expenses and track the progress of your actual international transaction costs.

Disclaimer

The information in this article is for educational and information purposes only and should not be relied upon for decision making. Always seek the expertise of a professional advisor or accountant prior to making any decisions.

Robert Bast

Robert is a proven strategic business leader with 18 years of experience in the financial and technology services industry. During his career, Robert has worked at several major banks and credit card networks and has helped to launch business strategies and products both in Canada and around the world. He has consulted with hundreds of small businesses, large market organizations, and enterprise companies on topics ranging from simple payment optimization strategies to account reconciliation and payment process re-engineering plans. As Chief Revenue Officer and Co-Founder of WayPay, he is responsible for the development of key partner strategies, go-to-market and growth plans, and a positive customer sales and acquisition experience.