International trade is a lucrative opportunity for companies of all sizes looking to grow their businesses and profit margins.
UK exports of goods and services rose to a record £621 billion so far this year, according to Secretary of State for International Trade, Liam Fox.
He suggests UK businesses are well placed to thrive in a rapidly changing global economy and develop new overseas ventures.
Companies will have to become smarter when it comes to navigating costs associated with currency fluctuations and exports to both the European Union and further afield.
“UK exports of goods and services rose to a record £621 billion so far this year”
Brian Jamieson is co-founder and CEO at FX and international payments specialist Centtrip, shares his top tips for SMEs to avoid pitfalls that arise when trading abroad, given the current economic backdrop of rising inflation, interest rates and trade tensions:
The global currency market is highly volatile and tricky to navigate by yourself. Geopolitical events and major economic announcements can move currencies within split seconds. Enlist an expert who will be able to help you plan for major rate movements and make an informed decision when it comes to choosing the best time to exchange currencies.
Using high street banks may not be a good idea
Many SMEs fall into the trap of relying on their bank to make international payments out of convenience. However, this usually means hefty fees, which can be avoided by shopping around for services from a more specialist provider.
Another common pitfall is using cards abroad for business travel and other expenditures. Some card providers will pocket as much as 2.5 per cent of the transaction value, with some charging even more. Consider using a prepaid card that holds multiple currencies and allows you to spend overseas without any additional, and often unnecessary, charges.
Currencies may come with underlying costs
Not widely understood but widely used, a spread is the difference between the price paid for your currency and the price at which it is sold to you. It may vary significantly from one foreign exchange provider to another.
It is crucial that you understand what the spread is, along with any associated admin and processing fees, so you can pick the best exchange rate to maximise your money. And look out for introductory rates. They may sound enticing at first but can sky-rocket as soon as the “honeymoon period” is over.
Budget, budget, budget
Last but not least, financial planning is indispensable. Try using planning and currency alerts tools. Not only will they help you calculate your outgoings in other currencies and expected revenue from overseas sales, but they will also help you navigate currency fluctuations and achieve an exchange rate that will work for your business.