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Currency Exchange Might be Costing Your Business
- Foreign exchange inefficiencies can significantly affect business profitability, impacting bottom-line results.
- Hidden FX charges, such as spread differences and dynamic currency conversion at point-of-sale, can inflate costs for businesses.
- Relying on default FX services from platforms like Amazon and PayPal can cost businesses up to 5% of revenue, emphasizing the need to take control of currency conversions.
- Businesses with global operations should seek low-cost, efficient FX providers to minimize losses, considering both spread and additional fees.
- For example, a 2.5% FX margin loss on €5 million in annual US sales can lead to a €125,000 direct hit to profit, affecting budget forecasting and business sustainability.
- Proactive currency management involves benchmarking providers, using specialists according to their strengths, and taking control of currency exchanges to save costs and gain control over transactions.
- Accepting money in a customer's currency into a virtual account can help accumulate larger volumes for better rates, while hedging products can mitigate future risk and improve forecasting accuracy.
- Businesses need to be more proactive in overseeing currency exchange processes to reduce currency risk and leverage economies of scale for competitive advantage.
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