The
South African Reserve Bank has complicated foreign exchange regulations, and
money transfers are complex. Small to medium South African businesses involved
in international transfers and payments, usually acknowledge this and leave the
process to the banks, unaware of whether the fees and rates they get are
optimal or not, and unaware that they can shop around for a better deal.
“To
come to terms with the fees being charged, your businesses should do a currency
audit on your international money transfers,” says Tim Powell, director of
forex at Sable International. “Start by assessing your current forex
arrangements and doing a market price comparison against your current bank or
FX provider.”
Powell
says customers are too complacent when they should be hunting for the best
possible exchange rates, lowest fees and efficient service with every transfer
made.
“Anyone
sending money overseas needs to take stock, whether it’s a business with
overseas suppliers or a person working abroad or making regular international
money transfers for a pension or mortgage.”
Powell
offers the following tips to help individuals and businesses navigate the
minefield of foreign exchange and international transfers:
Understand the basics before you begin transacting:
As
a small business owner, you may not have the capacity or the time to stay
constantly informed about international currency movements.
If
your business has any international exposure, i.e. you import or export goods, you
will likely be affected by those movements.
Therefore,
having a good understanding of how the foreign exchange market works is
important in ensuring that you are using the most efficient and cost-effective
method for your international money transfers. A good starting point is to
speak to your broker about the forex exchange market to learn more about how it
affects you when you make transactions.
You
also need to have a handle on how you make transactions and how you manage your
transactions in order to benefit your business and your bottom line.
This
will give you some insight into how the exchange market works and how best it
can service your business, but more importantly, this could all save you money.
Use forex experts
When
sending money abroad, most people and businesses head straight to their bank
because they assume that it’s the best option.
What
they don’t know is that most banks offer poor exchange rates and charge a
variety of hidden fees.
Instead,
you should use foreign exchange experts, who are most likely to secure the best
rates at the lowest fees.
Keep an eye on the rates
Don’t
ever assume you’re getting the best rate. An exchange rate can either save you
money or take a chunk out of your profits.
The
foreign exchange industry can be prone to a lot of “honeymooning” in the
beginning and then widening out overtime.
This
is a common trick used by unscrupulous brokers who hook you into using their services
by offering you amazing rates on your first few transactions. Later, as you
become more comfortable using their service, the margins begin to widen, and
you end up with really bad rates.
One
way to combat falling into this trap is to be vigilant about comparing the
rates you’re being offered against the real rate of exchange.
If
you notice the spreads widening each time you transact, it’s likely that you’ve
fallen into the “honeymoon rate” trap.
Article
originally appeared in Export & Import Southern Africa: www.exportsa.co.za
