Importers - How Foreign Exchange Margins Can Affect Your Cash Flow

David owns a Sydney-based company that imports kitchens and homewares. On average, he buys US $100,000 per month to pay various suppliers in China and South East Asia. Like many importers, David had not been worried about the exchange rates he'd been getting. The Australian dollar had been strong and reasonably stable. His foreign exchange provider had always done the job effectively, and because his turnover was increasing, he had access to a foreign exchange specialist who could give him better rates.

As world financial markets became engulfed in turmoil, the Australian dollar collapsed. The comfortable profit margin he once enjoyed was slashed, and costing his new shipments became difficult because the currency was so volatile.

Spurred by the fluctuating dollar, David sought a service with more competitive rates and lower fees. He found an online service provider which he discovered he could use, even though he was a customer of another financial institution. David compared the rates with that of his existing provider; a rate 20 points better meant that on a US $100,000 payment, he would save over $400.

He further discovered that instead of the $20 fee he was currently paying for each transaction, his new foreign exchange provider would not charge him any transaction fees for six months, and with their flat $5 fee per transaction thereafter, it meant further savings on each international payment. A quick calculation showed David could save about $5,000 over the year.

The online service also meant he could save time: in three steps he could book the foreign exchange rate, set up his payment, and complete his transaction on the spot and the system would keep his transactions on file for easy reference.

By taking the time to shop around, David not only discovered there are more competitive foreign exchange providers out there, but he also discovered a more seamless way of conducting his business foreign exchange payments which saved him time, as well as money.