Keep More of What You Earn

Are you all too familiar with receiving less on your international sales than what you invoice your client? Do you constantly wonder when you will receive payment from your international customer? There are strategies you can utilize to ensure timely payment and keep more of what you earn on your international sales.

A recent survey from the Small Business Association shows that getting paid is the #1 ranked challenge faced by SME exporters, with approximately 80% of those surveyed worrying about being paid at all. This is an all too common problem for U.S. exporters, but GPFX is at the forefront of innovation in implementing a strategy to make the collections process easier and more effective in reducing the risk that exists for receiving customer payment on each cross-border sale.

As we highlighted in 'Uncovering Hidden Costs on Your Imports', currency risk is embedded in every international transaction and can easily wipe out an exporter’s profit margins if not managed carefully. While being able to reduce your days sales outstanding to be more in line with your domestic receivables, it is also important for you as an exporter to receive the amount of USD that you are expecting. As buyers and sellers in different countries rarely use the same currency in their domestic transactions, a payment currency should be specified in each cross-border invoice/contract. The relative value between the USD and your buyer’s currency will likely fluctuate a great deal between the time the invoice is created and the time payment is actually received. As invoices typically carry somewhat lengthy payment terms, both sides are very much exposed to the currency fluctuations in the market.

Resources are available to help your company apply the most innovative and cost-effective solutions to not only ensure the security of your international sales, but also to enhance the relationships with your global customer by empowering your business to:

  • Price products competitively across the globe
  • Eliminate currency risk and hidden costs/fees for you and your customer
  • Hedge foreign receivables
  • Receive what you expect, when you expect it

For more information or to schedule a no-cost assessment, please contact GPFX at 415.992.5928, info@gpfxconsultants.com, or via the Contact Us form on our webpage. 

 

Uncovering Hidden Costs on Your Imports

As a U.S. manufacturer, it is important to be aware of the hidden and sometimes lofty costs you are likely incurring on every international payment. It is common for U.S. manufacturers that are operating internationally to overlook the benefits of paying their foreign suppliers in their local currency. Rethinking your strategy can help to extend payment terms, but also potentially reduce costs on imported goods, materials and equipment by up to 10%.

Although the value of U.S. imports continues to rise, most U.S. manufacturers continue to pay their suppliers in U.S. Dollars (USD). This approach essentially causes U.S. businesses to pay significantly more than market value for their imports, resulting in paying away unnecessary premiums that can otherwise be used to re-invest in their company.

Paying in USD vs. Foreign Currency

Why do so many U.S. manufacturers pay their international suppliers in USD? A likely reason is that for so long, the U.S. Dollar has been the world’s universal currency. It is a common misconception that overseas suppliers always prefer to be paid in USD.

Contrary to popular belief, paying in USD does not always mean your company is avoiding foreign exchange risk. It is crucial to note that within every cross-border payment lies exposure to currency risk and volatility. U.S. importers are typically unaware that their suppliers are carefully taking this into account when pricing goods, consequently at a premium.

How do suppliers protect their bottom line? Two preventative actions are to shorten payment terms and pad prices. Since foreign suppliers cannot be certain what value in their local currency they will be receiving from their customer, at the time of invoicing prices can be inflated by as much as 10 percent to ensure profitability in case the market moves out of favor.

How Can My Business Start to See These Benefits?

The most beneficial reason for US importers to consider paying foreign suppliers in their local currency is that it provides them the flexibility to negotiate better pricing and potentially extended terms.

After a U.S. company sends a USD payment overseas, the foreign vendor will need to convert those funds back to their local currency if they do not have a USD account with their bank. Because of this, the foreign supplier has to incur those conversion fees which cut into their profit margins.

Conversely, suppliers being paid in their local currency are able to lock in the contract’s local value. The supplier is given peace of mind that fluctuations between USD and their local currency, from the time period of when they invoice their customer until when they receive payment, will not have an effect on the value of their receivables.

Many times, just by simply asking your foreign supplier which currency they prefer to be paid in can help your business uncover more advantageous payment terms. By paying in their local currency, it is common that 30 or 60 day extensions can be negotiated.

Using FX Forwards to Hedge Risk

The U.S. importer is often positioned better to access more favorable exchange rates than the foreign supplier. As such, an importer can make use of hedging instruments in order to not be held captive by less-favorable rates set by their suppliers’ banks

The availability of hedging tools, such as FX Forwards, makes the local currency payments process easier and less risky. An FX Forward allows the importer to fix or lock in an exchange rate for a delivery date in the future, eliminating their exposure to fluctuations in the currency markets. Using FX Forwards for fixing exchange rates is typically less expensive than paying the premium that foreign suppliers often add to the cost of goods when they are getting paid in USD.

Our next post will examine how you can start keeping more of what you earn when exporting product overseas.

How Do You Start Saving?

GPFX can work with you to employ a proven cost-reduction solution to your international payment operations. GPFX clients have seen up to a 75% savings to this aspect of their business by engaging with us in implementing a strategy specifically designed to enhance growth opportunities across borders.

For more information or to schedule a no-cost assessment, please contact GPFX at 415.992.5928, info@gpfxconsultants.com, or via the Contact Us form on our webpage. 

 

Reducing Risks and Costs for the Global U.S. Manufacturer

With manufacturing costs high and margins already slim, it is critical that SMB’s are privy to practices that can be implemented to reduce unnecessary expenses. As the currency markets continue to become more and more volatile, businesses that operate internationally are susceptible to market fluctuations negatively impacting their bottom line. Effectively streamlining the way that your business handles both incoming and outgoing international payments can generate significant cost savings for years to come.

Whether your business sells product overseas or brings in resources from outside the United States, your revenue can be largely affected by the currency markets. Therefore, it is crucial to have a proactive, rather than reactive, approach to international payments. With every movement in the U.S. Dollar, strong or weak, in comparison to countries where you are doing business, your revenues and profit margins are feeling a residual impact.

For example, a strengthening dollar allows you to buy more foreign goods, in turn reducing your import costs. Conversely, a stronger dollar can hurt your international sales as the revenue you generate from overseas will result in fewer dollars when you repatriate those funds back to the United States.

It is common that business owners feel overwhelmed by the thought of navigating the currency markets, and turn a blind eye to the inherent risks that come with not having a model in place to mitigate such risks and exposures. Although we are not able to control the markets, we can still work together to protect your bottom line.

Manufacturing is at the heartbeat of our country and it is important to us that your business is protected against unnecessary fees and expenses. We want to empower you to reduce the costs of doing business internationally, enabling you to re-invest these funds back into your product and operations to accelerate growth.

Our next post will take a closer look at the impact international payments have on your importing costs.

How Do You Start Saving?

GPFX can work with you to employ a proven cost-reduction solution to your international payment operations. Our clients have seen up to a 75% savings to this aspect of their business by engaging with us in implementing a strategy specifically designed to enhance growth opportunities across borders.

For more information or to schedule a no-cost assessment, please contact GPFX at 415.992.5928, info@gpfxconsultants.com, or via the Contact Us form on our webpage. 

GPFX Consultants Launches New Foreign Exchange Offerings

GPFX Consultants is pleased to announce that we have launched two new offerings, adding to our suite of consulting and advisory services, that we are referring to as FX Enhancement and FX Management.

FX Enhancement empowers financial institutions to organically grow their foreign exchange business while maximizing revenues in the process. We assist correspondent banks across the country to foster an interactive state-of-the-art approach for how to thrive in today's foreign exchange market.

Our FX Management service assists corporations by partnering with their finance and treasury teams to evaluate their current FX risk management and hedging programs. Through our proprietary assessment methodology, our team of experts can offer a framework for how to best mitigate risks associated with foreign exchange operations and investments.

Through our fully customizable FX Enhancement and FX Management offerings, GPFX can help your team navigate the unfamiliar and make positive, impactful decisions for the greater benefit of your business.

GPFX has established deep partnerships with some of the most highly recognized providers of technology solutions and FX liquidity in the market which has enabled us to strengthen our reach and provide more innovative solutions for our clients.

GPFX brings decades of experience in Corporate, Retail, and Institutional FX. We offer a purely unbiased and non-execution service that enables us to deliver objective guidance in our evaluation. Whether you are a financial institution, MSB, corporation, brokerage, or hedge fund, we want to partner with your team to implement an innovative approach on how to evolve with current market demands in the foreign exchange space.

Below is a brief description of our current services that make up our FX Enhancement and FX Management offerings. If you would like more information or wish to receive a full no-cost and no-obligation assessment of your current foreign exchange business, please contact us at your convenience.

 

How GPFX can help:

  • Identifying New FX Opportunities: Building and maintaining strong and everlasting client relationships is at the core of GPFX’s business. We want to work collaboratively with you to identify new FX opportunities across your current client base. It is likely that your clients are only executing a portion of their total international transactions with your financial institution. By having GPFX accompany your relationship managers to visit clientele, we can assist in unveiling hidden FX opportunities that may not have been apparent. We are empowering our clients and their customers to turn their foreign exchange into a source of revenue.
  • Currency Conversion: How is your team currently sending funds to vendors or corporates in foreign countries? Most would say USD no matter the case. This could be a crucial mistake that can easily be rectified in order to help reduce costs and increase revenues. Many foreign suppliers pad their prices for US buyers by up to 10% or more to give themselves protection against market volatility. GPFX offers a complete end-to-end evaluation of your current payments structure laying a foundation to implement changes that will be mutually beneficial for both you and your clients.  

  • Liquidity Provider: GPFX will work alongside your team to evaluate all aspects of your FX business, with a focus on current and potential new sources of FX liquidity. Our unbiased and non-execution service enables us to deliver objective guidance in our evaluation. We are happy to communicate with your current FX provider in order to inject better price transparency that may lead to more competitive rates. GPFX also has strong partnerships with upstream banks whom we can introduce to you and your clients to obtain tighter and more competitive spreads.  

  • Executive Search: Foreign exchange is an exceptionally specialized field with diverse operational needs. By bringing on experienced FX professionals with a proven track record of success, your institution can switch the tone of your FX services from simply being a courtesy to clients to becoming a growing revenue stream. GPFX specializes in sourcing, evaluating, and delivering highly-qualified candidates with expertise in foreign exchange.

  • Risk Management: With every passing year the global economy continues to experience more and more enterprise globalization. Due to heavy market volatility, it is crucial to make sure your team is executing a well constructed risk management strategy. Understanding how to mitigate risk and successfully hedge in the FX market has a great impact on your business's bottom line. GPFX can provide valuable, customized solutions to your business by helping you properly identify FX exposures and minimize foreign currency risk through the implementation of a sound FX risk management policy and strategy..

  • Remote FX Manager: GPFX offers the flexibility to fully outsource your FX management and operations functions 24 hours/day to a team of highly experienced market professionals. Our customized FX Manager service gives you peace of mind that your FX business is being managed effectively and efficiently top to bottom. Whether you would like us to assist with trade execution function, offer on-demand trading platform support or provide you and your clients with market commentary and analysis, we can tailor a solution that best fits your needs.

  • Implementing FX Technologies: STP solutions are at the forefront of today’s operational landscape. GPFX has partnerships with some of the leading technology providers in the financial services industry.  We can help you implement on-demand FX exposure management software solutions and technology platforms to execute and process your FX transactions. If you are a financial institution looking to become an upstream liquidity provider, GPFX is up to date with the latest cutting edge liquidity platforms. We can work with your team every step of the way in making the transition a seamless one.

  • FX Consulting: GPFX is available to assist you with any of your foreign exchange business needs.  We offer flexible options that are personalized to meet your goals. Whether you require us for a short term onsite engagement or prefer our expertise on call when needed, we can customize the right solution for you.
  • FX Training: GPFX offers a tiered FX curriculum program tailored to your specific needs and goals, that can be utilized by both your team and your clients to gain a better understanding of the dynamics of the FX markets and the risks that may arise when managing your FX businesses.

 

Contact us:

Telephone: (+1) 415-992-8325

Email: info@gpfxconsultants.com