With increasing shipping costs, fuel, and interest rates, many businesses are concerned about eroding margins and a reduction in net profit.
However, many U.S.-based businesses are not aware of simple solutions available to them to reduce the cost of doing international business. These practices are not reserved just for times of stress and should be employed at all times during the life of your business to;
If you are paying global vendors in U.S. dollars and not in their local currency, you have currency exchange risk in the dollar value (the exporter increases the dollar price when their currency strengthens) and it is likely to be priced 5% too high.
95% of dollars paid internationally are converted into local currency. Your vendor has the foreign exchange risk and therefore has no choice but to increase the dollar price by 5% to protect themselves if their currency strengthens by the time they receive your payment.
If you request a dual price on your next order i.e. one in dollars, as you do today, and the other in your vendor’s currency then in almost all instances, by using GreenShootsFX, you’ll find the currency payment to be 5% cheaper.
And by fixing your FX rate today you’ll know just how many dollars to pay when the invoice falls due.
In many cases, you can increase your Days Payable which reduces your need to draw down on any lending facilities.