Top 5 things SMEs need to know when sending money overseas
If you’re operating an SME, you might know the feeling of the overseas crunch. You’re doing well at home, and it looks like now is the time to expand abroad. You aren't the only one. A recent report by The Economist Intelligence Unit found that 72% of the SMEs it surveyed worldwide expected that, in five years' time, between 11 and 50% of their revenues would come from other countries.
When expanding into foreign territories, it’s vital that you get international money transfers right. Here are some need-to-knows that will make sending money overseas work harder for your business.
1. Plan your international money transfer strategy
Deciding how you're going to move funds across borders is just as crucial as working out which borders you're going to cross in the first place. That means plotting out your priorities: do you need to send money quickly, cheaply, or – most likely – are both factors at the top of your list? And if so, which provider is going to be able to do that for you? It's important not to accept the first offer that comes along, or you could miss out on serious savings.
2. Find out about fees
In a survey of 565 small businesses executives, TransferWise found that more than 80% of them didn’t know how much they were paying banks for international money transfers. It also found that banks were charging 3-6% for the service – in a $50,000 transfer, that’s at least a $1,500 fee. Foreign exchange brokers, in comparison, tend to offer a fee-free service for large transfers as well as a better exchange rate, saving you around 3-4%.
3. Use exchange rate tools
Currency exchange rates are inherently volatile, so learn to ride the peaks and troughs to your advantage. You can ask your broker to put in place market orders or limit orders to make sure you're getting your ideal rate. Alternatively, if you need to transfer money in the future but the exchange rate looks good right now, a forward contract might be a good option – it lets you to take advantage of today’s low price.
4. Watch the clock
Trading across time zones and cultures requires forward-planning to avoid payment delays. In Brazil, for example, government restrictions mean that money transfers can take anything up to four days. Your broker should be able to advise you on any local market hold-ups to anticipate.
5. Choose transparency
On seeing the results of the TransferWise survey, its co-founder remarked: “Banks are making it almost impossible for small businesses to understand overseas money transfer costs.” But there's a simple way around that. International money transfer comparison sites like The Money Cloud offer clear, unbiased insights into what’s available, including the fees and accurate exchange rates for each transaction.
Opening up your SME to foreign markets can be as daunting as it is exciting. But going into the process with a cost-efficient strategy for how you're going to get your funds from one country to another will go a long way towards smoothing the transition. To start finding the right solution for you, use our comparison tool today.