Many companies conduct business internationally and deal with consumers or other businesses from various locations. Some companies open physical stores in other countries as well as sell goods online and many buy their stock from foreign firms. Expanding internationally can be a great move to help boost your finances and grow your business.
One thing that is important to fully understand is how international exchange rates can affect your bottom line. As with exchange rates when changing money to a foreign currency when you go on holiday, how much your dollars are worth in the currency of another country can benefit or harm the finances of your company. Being aware of the exchange rate when doing business internationally will help your company to avoid financial loss. Whether you need to send money to the UK to pay for goods or receive money from Europe for goods sold, this is something that you should take serious note of.
How do exchange rates they work?
In simple terms, it is a case of sending money in your currency that is then changed into the local currency at the other end at the given rate of exchange on that day. If you needed to send money to pay foreign staff their wages, for example, then any payment made in dollars would need to be converted into the local currency on receipt. If you get the most attractive rate around then you will have to send less money in your own currency to meet the amount needed in the foreign one.
It also works in a similar way for receiving payments, too. Let’s say you have sold a batch of go-karts into Germany and you invoice the buyer for 10,000 euros. They pay you the 10,000 euros as agreed but you then still need to turn it into dollars to be transferred into your bank account. If the exchange rate was at 1.00 on the day, you would get 10,000 Dollars. If the rate you got was only 0.500 though you would get just 5,000 Dollars. That is how international exchange rates work for business and why it is so important.
Tips on getting the best exchange rate possible
The easiest way for most businesses to get the best exchange rate is to use an online international money transfer company. They have the most beneficial exchange rates to take advantage of on any given day when compared to other currency exchanges like the banks. This way of completing international money transfers also tends to incur low or zero fees when compared to the banks. That means that you benefit from getting the best international exchange rate and also spend less on fees. When you factor in that they are also fast and secure, then they are a very handy way to transfer money internationally.
Understanding international exchange rates is vital
If you plan to do business internationally then understanding the idea behind exchange rates and how they can affect your company is crucial. The good news is that it is not a complex issue to get to grips with. As the above shows, it is mainly about finding the best rate you can on the day for any money you need to change.
Smriti Jain is the owner and senior content publisher at Financesmarti. Financesmarti is a website where she shares a lot of useful stuff for the people and business of India. This includes small business ideas and other banking information, as well. Smriti completed her education in science & technology from Delhi University. Smriti usually has interests in digital marketing now, and she has chosen this career for the full-time opportunity. The primary purpose of starting this blog to provide quality information on the banking industry to the people.