Three Ways to Get Better Exchange Rates

Any company that’s engaged in accepting international payments is likely looking for a way to get better exchange rates. However, there are several problems in obtaining this.

Firstly, a bank advisor likely will say that it’s very difficult to obtain an independent opinion on this topic. And secondly, an Internet search for a solution will likely just provide a massive listing of foreign money exchange services that are hard to understand. So, what comes next?

There are actually three practical solutions for a company to obtain better money exchange rates no matter if the business is just starting out, or has been around for several years. These three methods will allow a company to gain in performance gradually and independently:

money exchange services. Image by Nattanan Kanchanaprat from Pixabay
Money Exchange Services. Image by Nattanan Kanchanaprat from Pixabay

1 – Negotiate tariff conditions

When a company performs a foreign exchange transaction, the bank offers up the daily commercial foreign exchange rate. This corresponds to the interbank exchange rate (Internet rate) after the deduction of their margin.

So, the first way to negotiate a lower foreign exchange rate is to reduce the margin the bank charges. But how is this done?

To begin, estimate the savings potential by using an online exchange rate comparator. This is free to do, and all that’s needed is a previous notice of a foreign exchange transaction, as this first share assesses the rate that was applied by the bank.

Using this method results in a possible lessening of that margin, and this information can be shared with the lending facility to help negotiate a better exchange rate, which transforms that savings into a financial gain.

However, evaluating and trading exchange rates in real time is another chore. One tool that can be used to accomplish this is the Forex and Futures Exchange Rate Monitor. Indeed, once a company knows what the interbank exchange rate is in in real time compared to the bank’s quote, one can see how strong of a position the bank is in.

Once all the information is available, organize it to get a better chance of negotiating and improving the rate quoted by the bank more successfully. Plus, a history keeps the information regarding the profits realized by the bank and indicates the total of any savings that can be received.

2 – Work on the exchange policy as a whole

Improving a company’s commercial foreign exchange rate is a first step. Achieving better foreign exchange rates also requires paying strict attention to a company’s budget and accounting rates.

To maximize the chances of meeting these constraints, proper responsiveness is required. Once a listing of the various rates offered by the foreign exchange market is are available, a company can choose to react when informed of a better one via setting up a currency bank alert. Then, it wont be necessary to stay behind the computer screen all day waiting for the best chance of success.

Why “banking?” Because these rate alerts take into account the margin applied by the banks, which means there won’t be any more frustration associated with regular rate alerts. When the target exchange rate is reached, it is available in 83.2% of cases.

For 100% chance of success, the bank alert can be customized by integrating the bank’s margin into the mix. By positioning the target rate on the budget price or on the billing rate, no more opportunities for a lower rate will be missed. Therefore, the odds of meeting the company’s budget in the next fiscal year have just skyrocketed!

3 – Use the “super power” of being a Time Master

The last tip evokes the “super power” of treasurers and financial directors, which is their ability to control the timing of a transaction. Do not forget, a company’s operational calendar defines the timing of its foreign exchange transactions, not the other way around.

But this subtlety gives the company considerable leeway, and by exploiting it, a business can obtain better exchange rates. What’s the solution to use? It’s called forward exchange contracts.

Indeed, because of the interest rate differentials between monetary zones, better exchange rates can be seen on the futures market in Europe. Pay attention to this market, and a situation to exploit arises when forward exchange contracts can be associated with the dates for the company’s international payments.

Called term points, this difference between spot and forward rates sometimes complicates the judgment of what is a good exchange rate. Fortunately, Business Intelligence tools can be used to digitize the expertise of trading room professionals to simplify purchases.

Using these tools, any changes in futures exchange rates can be seen based on start and end dates. It’s similar to when someone waits to buy something online at a cheaper price.

Just adjust the quotes from the forward foreign exchange contracts to the operational schedule, then track all of the current forward currency contracts in a dedicated dashboard.

Finally, valuable key information about any possible exposure to currency risk is also obtainable in this fashion. So, a company’s foreign exchange risk management has just entered a new dimension…

This information is worth sharing with others. By following these three great recommendations, all that is left is to be organized and ask for a remarkable demo!

Arslan Riaz
Arslan Riaz is a business writer, who loves technology and the way it affects every part of our existence, everywhere around the world.He started writing about tech a decade ago, and is passionate about a wide range of topics including science, technology, finance, health, insurance, entertainment, politics, sports, property, and pretty much everything under the sun! Other than writing, he has worked in I.T. across several industries, including banking, retail, and software.