Industry Examples...

An Unnecessary Expense for UK Companies  
When UK organisations pay for goods in a currency other than sterling OR receive payments in a currency other than sterling, they pay quite a hefty price – in many cases, companies have no idea how hefty it really is.

During the process of making and/or receiving international payments (from sterling to euro, dollar, etc or vice versa) the banks can take a substantial margin without the organisation even realising it. This margin can add significant costs running into many £££'s, and in some instances nearly 5% can be added to a company’s annual costs. The sad fact is that this overhead is completely unnecessary.   

The banks profit from providing poor exchange rates and charging various fees. They also fail to assist the various industries on the money saving option available to fix exchange rates so that budgets are maintained. Although many exchange rates are unfavourable right now, it’s possible to ensure a rate is fixed so it doesn’t get any worse over the course of the next few months or year.  

Exploitation of UK Companies
The outrageous truth of all this is that the banks have caused the economic collapse. They’ve then paid bonuses for failure and to add insult to injury they continue to make excessive profits from organisations by exploiting them on the international payment process.  

Thankfully - there is a solution. By using Smart Currency Exchange, organisations can completely eliminate the unnecessary costs imposed by the banks. A Smart Corporate FX Specialist will be able to provide exceptional exchange rates, reduce and/or eliminate all fees and mentor organisations as to the options available to fix exchange rates.  

Let’s look at some corporate FX industry examples:    

Freight Forwarding
Let’s consider a freight forwarding company that has numerous low-value weekly transfers going from sterling to euro. When broken down, 30 individual payments equate to the value of approximately £2,500 that are sent per week.  

The company would be invoiced at future payment date (normally at the end of month) in euros and action the payments accordingly. The problem isn’t so much the falling value of the pound, but the volatility in the market and consequent inability to budget for payments. Also, the frequency of payments can take its toll. Banks often charge a fixed fee of £15 per transfer which could cost the company an unnecessary £2,000 per month.  

By working with a Smart Corporate FX Specialist and by entering into a monthly forward contract on a month to month basis, a logistics’ company would be able to fix a rate on the euro for the entire month and eliminate all transfer charges. This would allow an organisation to fix their costs for a month and calculate their profit accordingly. In the end, the organisation will also be able to eliminate more than £2,000 worth of charges from their monthly profit and loss account.  

Food Manufacturing
Marco runs an Italian Fruit and Vegetable Distribution company based in the UK. In September 2008, he won a contract with a large Wholesaler in Rome which gave him an order for goods six months before they were due to be delivered. The value was €95,000.00. This meant that the payment wasn’t due until March 2009. He contacted a Smart Corporate FX Specialist and was able to secure a rate of 1.2307.  Marco paid a small deposit (10%) to fix the exchange rate knowing he would pay the remaining fixed amount when the payment was due.  At the beginning of March 2009, Marco compared the rate he paid versus the rate currently offered and by fixing the exchange rate he saved £7,654.  

Plastic Manufacturing
Alan Jones, FD of Lincoln Plastics decided to purchase the latest Injection moulding machine in November last year; however the payment wasn’t due until late January 2009. The high powered machine was to cost him €37,500.00; He contacted a Smart Corporate FX Specialist and was able to secure a rate of 1.2538.  Alan paid a small deposit (5%) to fix the exchange rate knowing he would pay the remaining fixed amount when the payment was due.  Towards the end of January 2009, Alan compared the rate he paid versus the rate currently offered and, by fixing the exchange rate, he had saved £3,750.  

Fashion Industry
A fashion house in London makes regular purchases of Hemp Cloth for the production of their spring/summer range of Eco friendly fashion clothing. The total cost of materials and production for the season came to $52,000. The last two seasons had been priced at 1.80. The sliding U.S. dollar price had never been an issue, so when they came to address the seasons cost, it came as a big shock!  

In early January, the fashion house went to the bank for a quote and a price of 1.4 was offered. This increased the £ cost by 25% against their lost purchase of U.S. dollars which compelled them to look at their international payments in greater detail. On the 4th of January the organisation was able to secure a forward price of 1.53 from a Smart Corporate FX Specialist for this payment. This was a saving of £3,000 against the original quote given by the bank.    

Farming Industry
A farmer decided to purchase a yellow New Holland CR9080 Combine Harvester in May 2008 however the payment wasn’t due until Feb 2009. He contacted a Smart Corporate FX Specialist and was able to secure a rate of 1.31.  The farmer paid a small deposit (5%) to fix the exchange rate knowing he would pay the remaining fixed amount when the payment was due.  In Feb 2009, the famer compared the rate he paid versus the rate currently offered and, by fixing the exchange rate, he had saved £36,432.    

Rail Industry -Almost a £90,000 loss!
A signalling and control solutions company was sourcing production parts from Germany. The total cost of these parts came to €520,000 and the company had budgeted an exchange rate of €1.20/£1. However, at the turn of 2009 the banks were offering £1 for €1 and the company was looking at an exchange loss of nearly £90,000. A profitable contract had turned into a significant loss.  

The company started to panic, but within a month a Smart Corporate FX Specialist secured an average rate of €1.143/£1 for the €520,000. Still an exchange loss of £20,000 but at least they were now making money on the contract.

***
Smart, the corporate FX specialists, can save UK organisations 3% (or £3,000) on every £100,000 transacted on better-than-bank exchange rates. Further savings can be accomplished when working in tandem with a Smart Specialist to set and achieve budgeted rates. To avoid being further exploited by the banks and paying unnecessary overheads discuss your options with us today!