Part Four: How do know an international payment specialist is safe?
Many British companies make payments to or from the UK and in the process they unintentionally lose money. In some cases, losses can be tens of thousands of pounds. This is part 4 of a special 4-part series that has been written to outline how the bank-to-bank international payment process works, the specific areas where companies are losing money, definite actions that can be taken to contain or to avoid losses altogether and how to make sure the process is safe. At the end of this article you will find details on how you can download the full series of articles.
In the previous three parts, I explained that companies can save money by using an international payment provider rather than using a high street bank. Compared to the mark-up applied by the banks on a money transfer, clients can save up to £4,000 on a £100k transfer by using a currency specialist. And on regular monthly payments of £1,000 a saving of up to £40 per month is more than possible - that’s £480 a year. The other way to save is by enlisting the help of a specialist to reduce and/or eliminate fees - it’s sometimes possible to save £50 to £100 on every transfer.
I also explained that rather than being forced to take the exchange rate on the day that the money needs to be transferred, there is the option to buy a ‘Forward Contract.’ This allows organisations to reserve a fixed exchange rate over a period of say, 1 year. Although many exchange rates are unfavourable right now, it is thus possible to ensure that it doesn’t get any worse over the course of the next few months or year.
Plus there is the option of the ‘Limit Order’. This is for organisations that don’t necessarily need money urgently, but are happy to buy or reserve it for use at a later date if the rate is beneficial and as discussed with their currency company. This means that if you have regular payments abroad that you know about in advance and if the money market hits that pre-determined rate, your payment specialist will aim to buy the currency for you so that the value of your currency remains the same, thus making budgeting easier.
But what about the safety of using an international payment specialist over a bank? How can you ensure they are legitimate? How can you make certain that your funds are protected? When doing business with any company, especially one that will be handling your cash, it’s very important to do your due diligence and check them out. These are the main details you’ll want to research:
Companies House – make sure that the organisation that you’ll be sending funds through is a registered company at Companies House. Most organisations will display their company number on their website or on the letterhead and you can enter the unique number online to review their status.
Regulated by HM Customs & Excise – all international payment organisations must be regulated by HM Customs & Excise. To check that a particular organisation is registered, you can visit the Customs & Excise site and enter the company’s MLR number. The site will verify the company is on their books.
Financial Services Authority (FSA) – as of 2009 all institutions that move money international need to be authorised by the Financial Services Authority under the Payment Services Regulations 2009 (FRN 504509) for the provision of payment services. This FSA statement needs to be clearly highlighted on all company materials – including the website. So if you don’t see the FSA statement, make enquiries.
Location of the Bank – since the fall of Northern Rock and issues with the Icelandic Bank, many Brits have worried about guarantees from their banks. How much money will they guarantee to pay out if the bank goes bust? British banks only guarantee £50,000 per individual, whereas Irish banks have various schemes that can guarantee the full amount_. When selecting an international payment provider, if you’re moving funds over £50,000, it might be worth finding one that moves funds through the Irish banking system.
This concludes the special 4 part series. The key point to take way is that international payment specialist can help your organisation to reduce the expense associated to making/receiving payments overseas.
For more information on Smart Currency Business call: 0845 638 0571 (or +44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyBusiness.com
Wednesday, 28 April 2010
Wednesday, 21 April 2010
Stop Banks from Cashing in on your Company’s International Payments
Part Three: Securing exchange rates for the future
Many British companies make payments to or from the UK and in the process they unintentionally lose money. In some cases, losses can be up to tens of thousands of pounds annually.
This is part 3 of a special 4-part series that has been written to outline how the bank-to-bank international payment process works, the specific areas where companies are losing money, the actions that can be taken to relieve losses and how to ensure the process is safe. At the end of the article, there are details on how you can download the full series of articles.
In the previous two parts, I explained that companies can save money by using an international payment provider rather than a high street bank. Savings can be made by buying currency at rates that are better than offered by the bank. Compared with the mark-up supplied by the banks, there’s a possibility of saving up to a 4% on your transfer. On a £100,000 transfer that’s a reduction of £4,000 by using a currency specialist rather than a bank. And on a regular payment of £1,000 a month, that’s a saving of £40 per month or £480 a year. The other way to save is by enlisting the help of a specialist to reduce and/or eliminate banking fees. By doing this you could save £50 - £100 on every transfer!
Apart from saving money on better exchange rates and reduced banking fees (or indeed banking fees eliminated altogether) companies have a wide range of options when it comes to working with an international payment specialist. Rather than being forced to take the exchange rate offered on the day that the money needs to be transferred, there are alternatives that could save your organisation money.
You cannot control the impact of overseas prices, inflation or the actual exchange rate. However, you can and do have the ability to save on the cost of international payments. Many organisations fail to take sufficient time in planning for the cost of international payments and some don’t even realise they can actually take specific action to minimise the effect of changing exchange rates, which ultimately equates to squeezed profit margins.
The most common option that can assist companies greatly is to secure what is called a ‘Forward Contract’. This allows your organisation to reserve a currency exchange rate at that day’s rate while not paying for it in full or sending the money until an agreed date in the future. Only a small deposit is required to reserve a currency exchange rate. Indeed, you can fix the exchange rate for your company’s international payments for up to one year if it’s beneficial for your organisation to do so!
Due to historical data many companies know the approximate amount of foreign currency required over the course of the year. For example, they’ll know that last year £10,000 was spent with a supplier in Brussels and £24,000 was spent with another in Spain and so forth. Larger organisations may need to move in excess of £100,000 monthly, quarterly or annually. With this knowledge of future orders combined with the ability to fix a currency exchange rate, it is possible for smart UK businesses to reserve a currency rate for up to a year knowing that if the cost of foreign currency inflates it will not impact on the organisation’s margins.
By using a specialist, UK companies can reduce fees, get rates that are more competitive than the bank and reserve money at fixed rates for use in the future. Furthermore, some specialists offer a transparent fixed margin allowing organisations the peace of mind that they’re getting a good rate for every transaction.
If your European supplier will be selling you x amount of parts throughout the year are you happy for the price to change and even increase day by day? Would you be comfortable watching the exchange rates change, knowing that if sterling weakens your profits decrease? This is what happens when companies fail to plan a currency exchange strategy by fixing a budgeted rate. What the banks don’t tell you is that massive losses can be avoided.
In Part 4 of this 4-part series, I will explain how to research an international payment provider so you ensure the process is safe.
For more information on Smart Currency Business call: 0845 638 0571 (or +44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyBusiness.com
Many British companies make payments to or from the UK and in the process they unintentionally lose money. In some cases, losses can be up to tens of thousands of pounds annually.
This is part 3 of a special 4-part series that has been written to outline how the bank-to-bank international payment process works, the specific areas where companies are losing money, the actions that can be taken to relieve losses and how to ensure the process is safe. At the end of the article, there are details on how you can download the full series of articles.
In the previous two parts, I explained that companies can save money by using an international payment provider rather than a high street bank. Savings can be made by buying currency at rates that are better than offered by the bank. Compared with the mark-up supplied by the banks, there’s a possibility of saving up to a 4% on your transfer. On a £100,000 transfer that’s a reduction of £4,000 by using a currency specialist rather than a bank. And on a regular payment of £1,000 a month, that’s a saving of £40 per month or £480 a year. The other way to save is by enlisting the help of a specialist to reduce and/or eliminate banking fees. By doing this you could save £50 - £100 on every transfer!
Apart from saving money on better exchange rates and reduced banking fees (or indeed banking fees eliminated altogether) companies have a wide range of options when it comes to working with an international payment specialist. Rather than being forced to take the exchange rate offered on the day that the money needs to be transferred, there are alternatives that could save your organisation money.
You cannot control the impact of overseas prices, inflation or the actual exchange rate. However, you can and do have the ability to save on the cost of international payments. Many organisations fail to take sufficient time in planning for the cost of international payments and some don’t even realise they can actually take specific action to minimise the effect of changing exchange rates, which ultimately equates to squeezed profit margins.
The most common option that can assist companies greatly is to secure what is called a ‘Forward Contract’. This allows your organisation to reserve a currency exchange rate at that day’s rate while not paying for it in full or sending the money until an agreed date in the future. Only a small deposit is required to reserve a currency exchange rate. Indeed, you can fix the exchange rate for your company’s international payments for up to one year if it’s beneficial for your organisation to do so!
Due to historical data many companies know the approximate amount of foreign currency required over the course of the year. For example, they’ll know that last year £10,000 was spent with a supplier in Brussels and £24,000 was spent with another in Spain and so forth. Larger organisations may need to move in excess of £100,000 monthly, quarterly or annually. With this knowledge of future orders combined with the ability to fix a currency exchange rate, it is possible for smart UK businesses to reserve a currency rate for up to a year knowing that if the cost of foreign currency inflates it will not impact on the organisation’s margins.
By using a specialist, UK companies can reduce fees, get rates that are more competitive than the bank and reserve money at fixed rates for use in the future. Furthermore, some specialists offer a transparent fixed margin allowing organisations the peace of mind that they’re getting a good rate for every transaction.
If your European supplier will be selling you x amount of parts throughout the year are you happy for the price to change and even increase day by day? Would you be comfortable watching the exchange rates change, knowing that if sterling weakens your profits decrease? This is what happens when companies fail to plan a currency exchange strategy by fixing a budgeted rate. What the banks don’t tell you is that massive losses can be avoided.
In Part 4 of this 4-part series, I will explain how to research an international payment provider so you ensure the process is safe.
For more information on Smart Currency Business call: 0845 638 0571 (or +44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyBusiness.com
Wednesday, 14 April 2010
Stop Banks from Cashing in on Your Company’s International Payments
Part Two: How to reduce fees
Many British companies make payments to or from the UK and in the process they unintentionally lose money. In some cases, losses can be up to tens of thousands of pounds! This is part 2 of a special 4-part series that has been written to outline how the bank-to-bank international payment process works, the specific areas where companies are losing money, the actions that can be taken to alleviate losses and ways to ensure the process is safe. At the end of the article, there are details on how you can download the full series.
In part 1 of this series, I explained that companies send and receive money to and from the UK in large lump sums (for buying, selling or distributing products, parts or services internationally) and regular payments (for services rendered on a regular and ongoing basis for example). My main premise in part 1 is that the actual process of moving money isn’t rocket science, however the commission, currency exchange rate and fee structure imposed on clients by the banks can be extremely confusing. Rather than using a bank, there are specialist international payment organisations that assist their clients to save substantial amounts of money throughout the process. One of the ways in which they do this is to offer better-than-bank exchange rates. For every £1,000 exchanged the savings on better rates could be up to £40 – extend that over a series of payments, or on one large payment and it can really add up.
To continue, another way that banks profit from their clients is through various charges throughout the money transfer service. The charges imposed often include a fee to purchase foreign currency, another fee to send the funds and a charge from the overseas bank for receiving the funds. Before you know it, you can easily lose around £50 - £100 in fees for each and every transfer.
When working with an organisation that specialises in currency exchange and international transfers, you’ll discover various methods of reducing and often eliminating fees. For example, when transferring funds from the UK to Europe through a bank, you’ll often be charged £20 to £30 for the privilege. However, if you transfer funds from your bank using the Internet or Fast Payment system to a currency specialist, it’s possible to completely avoid the charge.
As for charges concerning the movement of funds overseas, most currency payment specialists charge a nominal value if the transfer is under £3,000 - getting better-than-bank exchange rates more than compensates for this small administrative fee. And all transfers over a particular amount, say £3,000, are sent free of charge. It’s important to note, however, that not all currency specialists will help their clients with regular low payments (for example, under £500).
The bank receiving fee can prove the most costly of all. Most companies aren’t even aware that this exists until they have an angry supplier or client on the line complaining of a short payment! European Law dictates that receiving banks are allowed to charge a ‘nominal fee’ on amounts under €50,000. ‘Nominal’ is open to differing interpretations and can vary considerably. If you are going to send regular payments, it’s often a good idea to remind your client and/or suppliers of this fact and suggest that they check with their bankers. In Spain for instance it’s not uncommon for banks to charge 1% of the value of money coming in or going out, so by comparison the charges that some UK banks make aren’t that bad.
With regard to receiving bank charges, some currency exchange and transfer specialists agree to absorb this fee – it’s best to check with them when booking your transfer. Whether you need to make a series of large payments or several transfers throughout the year, avoiding or reducing the various charges that the banks impose can save a lot of money. By researching the bank that will be receiving your funds along with working with your payment specialist, you could save money and boost profit margins.
In Part 3 of this 4-part series I will explain an option that companies find extremely valuable as it allows for securing set exchange rates for the future. This in turn helps companies to formally set budgets that won’t fluctuate when exchange rates move.
Call Smart now for more information on 0845 638 0571 or visit http://www.SmartCurrencyBusiness.com
Many British companies make payments to or from the UK and in the process they unintentionally lose money. In some cases, losses can be up to tens of thousands of pounds! This is part 2 of a special 4-part series that has been written to outline how the bank-to-bank international payment process works, the specific areas where companies are losing money, the actions that can be taken to alleviate losses and ways to ensure the process is safe. At the end of the article, there are details on how you can download the full series.
In part 1 of this series, I explained that companies send and receive money to and from the UK in large lump sums (for buying, selling or distributing products, parts or services internationally) and regular payments (for services rendered on a regular and ongoing basis for example). My main premise in part 1 is that the actual process of moving money isn’t rocket science, however the commission, currency exchange rate and fee structure imposed on clients by the banks can be extremely confusing. Rather than using a bank, there are specialist international payment organisations that assist their clients to save substantial amounts of money throughout the process. One of the ways in which they do this is to offer better-than-bank exchange rates. For every £1,000 exchanged the savings on better rates could be up to £40 – extend that over a series of payments, or on one large payment and it can really add up.
To continue, another way that banks profit from their clients is through various charges throughout the money transfer service. The charges imposed often include a fee to purchase foreign currency, another fee to send the funds and a charge from the overseas bank for receiving the funds. Before you know it, you can easily lose around £50 - £100 in fees for each and every transfer.
When working with an organisation that specialises in currency exchange and international transfers, you’ll discover various methods of reducing and often eliminating fees. For example, when transferring funds from the UK to Europe through a bank, you’ll often be charged £20 to £30 for the privilege. However, if you transfer funds from your bank using the Internet or Fast Payment system to a currency specialist, it’s possible to completely avoid the charge.
As for charges concerning the movement of funds overseas, most currency payment specialists charge a nominal value if the transfer is under £3,000 - getting better-than-bank exchange rates more than compensates for this small administrative fee. And all transfers over a particular amount, say £3,000, are sent free of charge. It’s important to note, however, that not all currency specialists will help their clients with regular low payments (for example, under £500).
The bank receiving fee can prove the most costly of all. Most companies aren’t even aware that this exists until they have an angry supplier or client on the line complaining of a short payment! European Law dictates that receiving banks are allowed to charge a ‘nominal fee’ on amounts under €50,000. ‘Nominal’ is open to differing interpretations and can vary considerably. If you are going to send regular payments, it’s often a good idea to remind your client and/or suppliers of this fact and suggest that they check with their bankers. In Spain for instance it’s not uncommon for banks to charge 1% of the value of money coming in or going out, so by comparison the charges that some UK banks make aren’t that bad.
With regard to receiving bank charges, some currency exchange and transfer specialists agree to absorb this fee – it’s best to check with them when booking your transfer. Whether you need to make a series of large payments or several transfers throughout the year, avoiding or reducing the various charges that the banks impose can save a lot of money. By researching the bank that will be receiving your funds along with working with your payment specialist, you could save money and boost profit margins.
In Part 3 of this 4-part series I will explain an option that companies find extremely valuable as it allows for securing set exchange rates for the future. This in turn helps companies to formally set budgets that won’t fluctuate when exchange rates move.
Call Smart now for more information on 0845 638 0571 or visit http://www.SmartCurrencyBusiness.com
Wednesday, 7 April 2010
Stop Banks from Cashing in on your Company’s International Payments
Part One: The unnecessary cost of making or receiving international payments
Many British companies send money to, or receive money from, overseas organisations and in the process they unintentionally lose money. In some cases, these losses can add up to tens of thousands of pounds! This series of four articles has been written to outline how the bank-to-bank international payment process works, the specific areas where companies are losing, definite actions that can be taken to lessen these losses and how to ensure the process is safe.
Initially, most companies are introduced to the international payment process when buying, selling or distributing products, parts or services internationally, be it in Europe, America, Australia or the Far East. To complete the transaction your company will have to either buy or receive the relevant foreign currency necessary.
Whether transferring large or small amounts internationally, either on a one off basis or regularly, it’s the same procedure. The company making the transfer instructs their bank to send the amount due to the beneficiary’s bank overseas. When calculating the amount due in the overseas local currency, the bank will instruct the buyer of the cost of the currency and they will be debited accordingly. Within 5 days of instructing the bank, the funds in the designated currency will hopefully arrive and clear at the overseas destination.
The actual process of moving money isn’t rocket science – however, the commission, currency exchange rate and fee structure imposed on companies by the banks can be extremely confusing. And, taking advantage of this confusion, the banks are able to relieve companies of substantial sums of money without them even realising it.
There is a high cost associated with the process of converting foreign currency and many business owners are unaware of just how high this cost truly is! When you go to your bank, as opposed to an international payment specialist, to make or receive international payments, you could be paying up to 4% more than you have to on poor exchange rates alone. That’s £4,000 paid out unnecessarily on every £100,000 exchanged and transferred.
Unlike payment specialists, who get rates from the live market throughout the day, some banks set their rates just once, in the morning. Whether you call your bank to get a set rate or are given access to live bank rates, the bank sets a wide differential between the rates that they buy money at and the rates that they sell it for. This means that they create a cushion or gap that allows them to make a profit even if the rate moves against them by quite a large margin during the day.
Payment specialists, on the other hand, differ from banks in that they do not set their rates at the start of the day but call into the market at the time of the transaction to get the best rate for the client. Because they are working with live rates, they can get closer to the interbank rate, thus saving their clients huge sums of money.
What exactly does ‘interbank rate’ actually mean?
This is the rate you’ll find in the newspaper, on the news, on teletext and on most currency-related websites. This is not the rate that will be used when you transfer currency for your company – rather it is the rate that banks themselves use when they’re moving their own money. This rate does however give you an indication of where the rate is and what direction it’s moving in. It also gives you a rough idea as to how much the foreign currency will cost your company.
When you do decide to buy currency or to make an international payment the institution that you do it through will put a ‘mark-up’ over and above the interbank rate. Banks have been known to charge clients up to 4% more for popular currencies such as the euro and US dollar and up to 9% for less commonly requested currencies. Contrast this with a payment specialist’s low margin of only 1% and you can quickly calculate the savings.
Poor exchange rates are only one of the ways that the banks make unreasonably high profits from their business clients. In the next part of this series, I’ll explain how they also charge organisations for the privilege!
Call Smart now for more information on 0845 638 0571 or visit http://www.smartcurrencybusiness.com/
If you would like to receive all four parts of this article together then please contact us on 0845 638 0571
Many British companies send money to, or receive money from, overseas organisations and in the process they unintentionally lose money. In some cases, these losses can add up to tens of thousands of pounds! This series of four articles has been written to outline how the bank-to-bank international payment process works, the specific areas where companies are losing, definite actions that can be taken to lessen these losses and how to ensure the process is safe.
Initially, most companies are introduced to the international payment process when buying, selling or distributing products, parts or services internationally, be it in Europe, America, Australia or the Far East. To complete the transaction your company will have to either buy or receive the relevant foreign currency necessary.
Whether transferring large or small amounts internationally, either on a one off basis or regularly, it’s the same procedure. The company making the transfer instructs their bank to send the amount due to the beneficiary’s bank overseas. When calculating the amount due in the overseas local currency, the bank will instruct the buyer of the cost of the currency and they will be debited accordingly. Within 5 days of instructing the bank, the funds in the designated currency will hopefully arrive and clear at the overseas destination.
The actual process of moving money isn’t rocket science – however, the commission, currency exchange rate and fee structure imposed on companies by the banks can be extremely confusing. And, taking advantage of this confusion, the banks are able to relieve companies of substantial sums of money without them even realising it.
There is a high cost associated with the process of converting foreign currency and many business owners are unaware of just how high this cost truly is! When you go to your bank, as opposed to an international payment specialist, to make or receive international payments, you could be paying up to 4% more than you have to on poor exchange rates alone. That’s £4,000 paid out unnecessarily on every £100,000 exchanged and transferred.
Unlike payment specialists, who get rates from the live market throughout the day, some banks set their rates just once, in the morning. Whether you call your bank to get a set rate or are given access to live bank rates, the bank sets a wide differential between the rates that they buy money at and the rates that they sell it for. This means that they create a cushion or gap that allows them to make a profit even if the rate moves against them by quite a large margin during the day.
Payment specialists, on the other hand, differ from banks in that they do not set their rates at the start of the day but call into the market at the time of the transaction to get the best rate for the client. Because they are working with live rates, they can get closer to the interbank rate, thus saving their clients huge sums of money.
What exactly does ‘interbank rate’ actually mean?
This is the rate you’ll find in the newspaper, on the news, on teletext and on most currency-related websites. This is not the rate that will be used when you transfer currency for your company – rather it is the rate that banks themselves use when they’re moving their own money. This rate does however give you an indication of where the rate is and what direction it’s moving in. It also gives you a rough idea as to how much the foreign currency will cost your company.
When you do decide to buy currency or to make an international payment the institution that you do it through will put a ‘mark-up’ over and above the interbank rate. Banks have been known to charge clients up to 4% more for popular currencies such as the euro and US dollar and up to 9% for less commonly requested currencies. Contrast this with a payment specialist’s low margin of only 1% and you can quickly calculate the savings.
Poor exchange rates are only one of the ways that the banks make unreasonably high profits from their business clients. In the next part of this series, I’ll explain how they also charge organisations for the privilege!
Call Smart now for more information on 0845 638 0571 or visit http://www.smartcurrencybusiness.com/
If you would like to receive all four parts of this article together then please contact us on 0845 638 0571
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