Optimizing foreign exchange: 5 SME Forex tips

Foreign currencies and foreign exchange transactions (fx) are an important topic in more and more SMEs. Therefore, we have listed below 5 tips for companies to optimize their SME forex management.

Actively plan your SME’s forex

Foreign currencies should be actively managed and planned in companies. Thus, it is important to take the following into account when preparing the annual budget: when are which investments and purchases due? And, consequently, what amounts should be available by when and in which currency? Are there customers who, in turn, pay in third currencies, and can part of the foreign exchange requirement be hedged naturally as a result?

Keep an eye on exchange rates

Currency markets are never standing still. Thanks to proactive planning (see first point), you know which currency pairs are particularly relevant for your business. Try to get an overview for where these currencies stand and monitor the rates. You can either do this monitoring yourself by actively looking at the rates on a regular basis – or you can conveniently set up an fx rate alert at amnis and be regularly informed about the latest developments via e-mail.

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Identify and hedge potential risks

Forward transactions are an important instrument to hedge against the fluctuations in the currency market. In a forward transaction, a currency is bought or sold against another currency at a specific maturity date. The exchange rate is already fixed when the transaction is concluded. This means, that the exact exchange rate is already known in advance, which simplifies the calculation and eliminates exchange rate risks.

Savings potential when paying bills in local currency

Larger suppliers abroad often offer the possibility to pay in various currencies. But be careful: you will often save money if you pay invoices in the local currency instead of CHF or EUR. Particularly with suppliers from the Asian region, discounts of up to 4% may be possible when paying in local currency. Therefore, actively ask your suppliers whether you can receive an invoice in CHF/EUR as well as in the local currency and compare them.

Compare fees and margins

Payment service providers and banks charge an exchange rate markup for every foreign currency exchange. These margins are often not very transparent and many SMEs do not exactly know how high they actually are. This is because the exchange rate markups are already included in the rate offered and, therefore, do not appear as a separate cost item in the income statement.

To ensure smooth and accurate cross-border payments — and to minimise unnecessary fees – providing the correct Bank Identifier Code (BIC) is important.

Many banks charge exchange rate margins of 1-2%, which is enormous, as they directly impact the SME’s margin. It is therefore essential to check your current markups to be able to compare them with other providers and optimize your margin.

With growing globalization, the optimization of SME forex and fx hedging is becoming an increasingly important competitive factor for small- and medium-sized companies. While large companies have a variety of competitive banking solutions available, SMEs often struggle to find an affordable and efficient trading and payment tool. amnis offers a powerful and modern foreign exchange and payment solution for SMEs. Try the demo account for free: