The Australian dollar is facing downwards pressure and for the small business, it is important to understand that currency fluctuations can greatly affect cash flow. Unfavourable currency movements will reduce your bottom line, while favourable movements present opportunity for cost savings. This means you need to be strategic when you make international currency transfers and think about how to minimise your fees when making these transfers.
*** How to reduce the transfer risk costs?
You can use these available risk management tools to know more your market.
1️⃣ Spot options: buying and selling at market exchange rates
2️⃣ Hedging: where you buy a set amount of currency that will be settled at an agreed date and rate in future in order to avoid future currency fluctuations and manage your budgeting better.
3️⃣ Currency Options: same as hedging, but you are not obligated to exercise the option. You may choose to take the spot rate if exchange rates are more favourable. While there is a premium for this option, it’s worth considering as part of your risk mitigation strategy.
4️⃣ Limit Orders: When a target currency rate is triggered you can buy or sell your currency. This will allow you to buy at rates that represent value or sell before they lose value.
*** How can we help you?
If you are unsure about the budget planning for your small business, contact us today to arrange the meeting with our finance manager and accountant via (03) 8548 1843 or email email@example.com.