As part of Season 6 of Creative Freedom, we decided to take our parodies to a new level. Here's the full-length parody from Episode 1.
A few years ago, a client wanted to pay me in an international currency. I had no idea how it worked. I knew that, as my business grew, there might be more opportunities available to me if I was able to accept international payments and foreign currencies. Then, I learned that some currencies are valued higher than my own. For me, it made sense to begin accepting some forms of international payment as a "hedge" against the value of the dollar. It sounds complicated, but it's actually pretty easy. Right now, my PayPal account holds two currencies: US Dollar and GB Pound Sterling. Most of the time, the Pound is valued higher than the Dollar, so it makes sense and sort of acts like a savings account with a higher rate of return.
Every business needs to consider how they are going to handle their international payments. However, it is fair to say that there is a lot more to think about if you are a small business. After all, you probably don’t have the resources that big businesses do, which can make the whole process a little bit more difficult.
In order to manage your fund effectively and be competitive, you need to have a plan in place. This is something a lot of business owners don’t do, as they see it as unnecessary or a waste of time, but leading entrepreneurs like Dee Agarwal know that this is important. If you don’t put a plan together, there is no way you will be able to handle your international payments effectively, which in turn means you will be losing out on money and opportunities. It may be wise to use the services of a professional to put your plan together. You may see an accountant as an unnecessary expense, but all businesses need one, so it’s worth paying a little bit extra for this service so you can put a strategy together, especially if you don’t have a clue where to start. When putting your plan together, you will need to determine what your needs are in terms of cross-border payments, this relates to both incoming and outgoing payments. Once you have done this, you will then be able to outline your actions accordingly.
Putting a plan together is only the beginning. It will help you to get a true understanding of your company in relation to international money. However, you will find that there are many steps you can take afterwards to give your business the best chance of putting this plan into action effectively. One of the most crucial things you need to do is make sure your business has a foreign currency account. Look for an account that is step up for international transactions specifically. If there is one country where your company does a lot of business, let’s say you have several suppliers and clients in one destination, then it may be worth opening a foreign currency account if you have many transactions in that specific currency. Not only will it make your life a lot easier, but you won’t be losing out on money every time you have to exchange the currency. It is also a good idea to make sure you have cash handy in that currency. There are several reasons why this is the case. Not only can it lower the requirement for numerous cross-currency transfers, but it can reduce currency risk and help companies react more quickly.
Do you need to make a spot payment? A spot payment essentially means that you either buy or sell currency at the exchange rate that is offered at present. There is no time to waste – you have to exchange currency rapidly. A spot payment usually occurs on an irregular basis and is hard to predict. After all, for regular payments, you will have a strategy in place for securing the best exchange rates. However, with a spot payment, you don’t have the luxury of time, and thus you need to think on your feet. Although you need to exchange currency immediately, you will need to look for a provider that offers low fees and competitive spreads between the rates for buying and selling.
You should also make sure that your business is taking advantage of online money transfers. This is much more convenient and efficient. It is also beneficial in terms of payment visibility and cash management. You will be able to settle invoices with vendors located overseas in a more cost-efficient manner. There are also budgeting tools that are worth taking advantage of too. You will be able to see how much your income and outcome is from cross-border operations, which can help you to make informed decisions in the future. Remember, the only way to move forward is to have a clear picture of your operations at present.
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