The Smart way to make company relocations more cost effective

Unfortunately for many businesses and their employees, the issue of currency exchange becomes an after-thought when relocating abroad – despite the potential for this aspect to be the most costly of all.

There are plenty of things to consider when undertaking an international relocation. There is selecting a removals company, organising accommodation in the new country, arranging visas for staff moving outside of the EU, ensuring adequate transit insurance is in place, booking flights, sorting what equipment will be relocated...the list goes on. Yet managing currency transfers is all-too-often forgotten.

International relocations will affect an employee individually, the company's HR division as well as the business at large, so the costs of overlooking any means of achieving substantial cost savings can have wide-felt reverberations.

HR departments must ensure that any relocation produces cost benefits and/or improved efficiencies in order for the move to be feasible. There is also a duty of care for employees, while maintaining a satisfactory level of productivity.

This requires a careful balancing act, making the move attractive for employees so as not to lose skilled workers, while meeting budgetary constraints.

When making payments associated with an international relocation, HR managers should look not just at the costs of the required services but also the exchange rates they are receiving to ensure optimal value is being achieved. Foreign-denominated costs can include immediate employee expenses, employee accommodation, visa applications, taxation registrations, local insurance coverage and so forth.

For a business as a whole relocating offshore, the cost burdens will be even more acutely felt. Indeed, changes in exchange rates can mean the difference between profit and loss on future transactions, and even negate the need to move at all.

Exposure to currency rate fluctuations does not just affect the cost of the immediate relocation.  On an ongoing basis, exchange rate movements directly affect the cost of imported materials, the competitiveness of exports and the profit margins on sales. Exchange rates also have more wide-reaching affects, such as on the price of energy and cost of living – affecting business operating costs and staff wage pressures.

Indirectly impacting on businesses are the impacts on the employee. Even if the business directly covers the costs of their relocation, there will still be personal costs incurred, such as transferring money from the sale of UK assets, accessing their salary and personal travel back to the UK.

Prohibitive costs in these areas have the potential to reduce the attractiveness of a relocation to employees, result in demands for higher relocation allowances or lead to employee stress which, in turn, affects staff productivity and morale.

Given these wide-reaching effects of adverse foreign exchange transactions, it is crucial for business operators to consider whether currency risk mitigation strategies are factored into their  overall risk assessment and management strategy.

There are a number of ways businesses can reduce currency-related costs during a relocation. For example, forward contracts enable a favourable rate to be locked in for up to 12 months in advance, and are a valuable means of delivering cost certainty and budget integrity. Orders to buy allow non time sensitive transactions to be completed once market rates reach a a pre-determined point. And a limit order allows a business to set a floor under the price at which it is willing to make a trade, so as to restrict wild fluctuations and protect against losses from adverse rate movements.

Once a risk mitigation strategy has been formulated, the next step is to determine a way of implementing it that does not add to the already numerous expenses incurred as part of the relocation.

Far from being effective management tools, high street banks are actually the least efficient avenue in which to pursue currency transfers. Notorious for poor customer service and lengthy queues – both in person and over the phone – banks also charge hefty transfer fees on most transfers for SMEs.

These fees can equate to £30 or more per transfer. For businesses making dozens of transfers each week or month, these fees can quickly add up to thousands and even tens of thousands of pounds. Banks also effectively double dip on currency transfers by providing less-than-competitive rates of exchange.

In any aspect of an international relocation, Smart Currency can offer significant cost savings and added value – at no direct cost to the user.

As a reputable international payment specialist, Smart Currency Business assists UK SMEs by offering tailored risk mitigation planning, access to all of the major currencies and the full suite of currency transfer services. Smart does not charge transfer fees on transactions over £3,000 and offers better-than-bank exchange rates which deliver savings of as much as 4 per cent of the value of the transfer.

For the individual, Smart Currency Exchange assists clients on large and regular transfers, which are both handled efficiently and very cost-effectively. This personal service is a great help during what can be a difficult and stressful time.

For more information on how Smart Currency Business can reduce the costs of an international relocation for your firm and your employees, call us today on 0207 898 0500.