Currency exchange is a process that every Canadian business dealing with international suppliers and clients can’t avoid.
It’s an integral part of business operations, and it’s not uncommon for large volumes of revenue and costs to flow through currency exchange facilitators to ensure each party gets hold of their preferred currency.
While many payment facilitators exchange currencies automatically behind the scenes, the truth is that not all these payment facilitators are of equal value.
Some of these institutions charge a higher fee than others, which can eat away at your profits or increase your costs.
While the percentage change may be minimal from facilitator to facilitator, they aren’t entirely negligible, especially if you’re dealing with large volumes of currency. In fact, your business could be losing thousands of dollars per year by choosing bad currency exchange partners.
The good news? It’s very much possible for your business to make some internal changes to save money whenever you have to exchange currencies.
If you’re on the lookout to keep your savings intact as a Canadian business owner, then you’re in the right place. Let’s explore four ways you can support your business by changing up how you approach currency exchange.
1. Partner With a Reputable Banking Provider
The first step Canadians must take before considering the monetary exchange side of things is to partner with a reputable banking provider. In most cases, your bank will be handling the bulk of your international payments, so its terms will matter greatly in affecting your bottom line.
That being said, not all banks are structured in a way that’s competitive for people who frequently engage in foreign exchange. Many traditional banks make most of their revenue from retail banking services, such as local savings accounts, mortgages, or credit products. Currency exchange won’t always be their main focus.
As this is the case, it’s essential to research your business banking provider before choosing one to ensure that your banking needs will be adequately met, particularly if you’re dealing with frequent currency exchange.
If you need a lead, licensed financial institutions like Scotiabank and the Royal Bank of Canada specialise in facilitating international payments and make great partners. Consider opening an account with them or learning more about their product offering to see if they align with your business goals.
In any case, when choosing a business bank partner, ensure that you select one that offers competitive exchange rates as part of its core services. OFX gets into detail on the best approach to choosing a bank.
Once you’ve picked the right bank provider, you’ll have a better likelihood of scoring better rates whenever you request to exchange currency or accept international payments.
2. Leverage Online FX Platforms
As convenient and accessible as banks are, they aren’t always the best option for businesses that frequently move money across borders. Many of these banks offer currency exchange services at a high rate or with wide spreads, chipping away at your profits.
A more affordable alternative is to use an online foreign exchange platform to facilitate currency exchange. Besides the drastic price cut, these foreign exchange platforms also offer more features that make international transfers a breeze, enabling you to save money and enjoy faster settlement times.
The greatest perk of these platforms is their transparent pricing scheme. Many of these online foreign exchange companies offer the rates of each trade upfront, thus giving businesses the opportunity to know the exact cost reduction at a glance.
This is important for small businesses, as they benefit greatly from having a clear overview of how their business is faring to ensure that they’re directed towards a profitable angle. Equipped with this information, business owners can make more precise decisions that can help them reduce business costs while staying in upstanding legal compliance.
3. Open Multi-Currency Accounts
If your business regularly works with clients or suppliers abroad, owning a multi-currency account can be a total game-changer. The purpose of this account is self-explanatory—it allows you to store funds of a foreign currency in the same place as your local savings account.
This can easily be done by contacting an agent in your financial institutions of choice or fiddling with the settings in digital wallets like Wise.
If you’re dealing with a US client, for instance, you can open a dollar savings account on your business bank account and have the client send the funds to your US bank account number.
The benefit of owning this account type is that you don’t have to stomach the cost of exchanging currency when you don’t need to.
For instance, if you want to purchase something in a US-based store with American dollars, then having USD on hand that hasn’t been converted to CAD directly means you’ll be saving the cost of exchanging the currency not once, but twice.
Beyond cost savings, having multiple bank accounts makes it easier for you to track your accounting entries by keeping foreign earnings separate.
In essence, with this bank account type, you can set your business up for greater flexibility and financial control when it comes to facilitating global trade. This, in turn, helps you keep your business expenses low while still maintaining the same level of trading volume and activity as you otherwise would.
4. Know When to Convert
Timing your currency conversion can be the difference maker in saving you a chunk of your savings. Just like stocks, the exchange rates of various currencies tend to swing throughout the day—not too wildly, but still noticeably so.
As this is the case, it’s a good idea to be in the loop when it comes to central bank updates, global news, and market trends to have a good idea of the price of your currency (CAD in this case) and whether it’s strengthening or weakening against other currencies.
Unlike stocks, the Forex market operates 24/7. This means that there’ll be times when you won’t be able to see changes in price or take immediate action when the price trend is in your favour.
To manage this, consider setting up alerts with your banking provider when a currency price falls below a pre-set threshold. You can also use an FX platform that has built-in conversion features to allow you to spread your investment across a more diversified time span.
By putting these safeguards in place, you won’t need to be constantly glued to the charts to be able to take advantage of favourable movements. Timing the market isn’t always guaranteed to reap profits, but you can maximise your chances by being smart about it and incorporating market trends and analysis into your overall investing strategy.
And that about does it for this article on how Canadian businesses save money when accepting or sending foreign exchange to various stakeholders. We hope this article will help your business make better moves when dealing with foreign currencies.
