How-to Save Money When Doing Business Internationally – Part One

Growing your business from a domestic company to an international brand is an exciting and scary endeavor. On one hand, your homegrown business that you started from scratch is poised to explode on the international market where there will be countless new ways to profit and grow, but on the flip side there will be a number of unforeseen hurdles and a steep learning curve.

After logistics, one of the trickiest aspects of expanding internationally is managing your finances. A number of things can lead to higher costs and sometimes, just a tiny mistake can mean the loss of thousands of dollars. International banking and money transfers are a large part of doing business overseas and the fees associated with them are often overlooked as the cost of doing business, but they don’t have to be. There are a variety of things you can do to save money while growing your business overseas.

 

Keep an Eye on the Exchange Rate

Doing business internationally leads to unexpected ups and downs in your cash flow based on exchange rate swings. If you have a slim profit margin, this is doubly important. Exchange rates can work with you or against you depending on your timing and it’s vital to remember they change daily. Timing your currency transfers whether hourly, daily, or weekly, to align with the best exchange rate can equal to big savings.

In addition to keeping an eye on the daily swings in the exchange rate, there are a number of things you can do to hedge against negative currency moves. You can use forward currency contracts to lock in a specific exchange rate or set up a currency option. Check out part two of this article to learn about the ins and outs of these options more fully.

You’ll find out that at times it will be better to accept payments in a foreign currency and other times it’s best to accept payment in USD. Just make sure you discuss and agree with your clients upfront about the type of currency you’ll be accepting.

 

Don’t Forget About Banking and International Transfer Fees

The basics of international banking are very similar to domestic banking, but the fees associated with the services vary greatly. Take the time to fully explore your options to find out which institutions offer the best services at the lowest cost.

Even if you have a foreign bank account and credit card, at some point you’ll either need to send money abroad or want to take some of your profits back home. This is where you can really get whacked with international transfer fees from the large banks. Despite having an overseas bank account, it’s often best to use foreign exchange transfer services like Xoom or World First for your international money transfer. They offer better exchange rates than banks, usually by 3% or 4%, and the fess will be lower too. Many offer large international money transfers at no cost too.

 

The Takeaway

Expanding your business overseas is going to take a lot of moxy, a touch of knowhow, and maybe even a bit of luck. If you are smart about it and plan correctly though, the positives will far outweigh the downsides.

 

 

 

 

 

 

H1B Visa Holders Can Save When Sending Money to Family Overseas

If you’re like most H1B visa holders, you’ve left your friends and family back home in the hopes of making a good western salary. Not being able to see your family on a daily basis is a sacrifice you’re willing to make knowing that in the end, it will be worth it.

Unfortunately, with the high cost of living in America and the exorbitant fees charged by banks for sending money overseas, many H1B visa holders find it difficult to give their family as much money as they had hoped. So what’s the life on an H1B visa holder in America like and how can you save when sending money internationally to ensure your family is really benefiting from the sacrifice you’re making?

 

The Life of an H1B Visa Holder                                                                                     

Living and working in America as an H1B visa holder has its fair share of limitations. Unlike American citizens, you aren’t allowed to work multiple jobs or for multiple companies. The rules of an H1B visa state that you must work full-time and only for the company that is sponsoring your visa. You also aren’t eligible for any federally-held education loans.

There is also a fair bit of uncertainty that comes along with the visa privilege. For example, if you get laid off, you cannot claim unemployment and are supposed to leave the country. The loophole here would be if you can quickly find another company to sponsor your visa.

So with all of the uncertainties and drawbacks of living on an H1B visa, why do so many people still come to America and work on them. The answer is simple. They are much easier to obtain than a green card and the opportunity to make a western salary is hard to pass up.

 

How-to Ensure Your Family is Getting as Much Money as Possible             

You have put so much work into educating yourself, learning a skill, and getting an H1B visa so you can make good money working in America that it doesn’t seem fair for the huge banking corporations to take a large chunk every time you send it back home, but that’s exactly what they do.

It is not uncommon to lose 8% or more on the value of your money during an international money transfer with most banking institutions. How would you feel sending $2,000 USD to your family back home, paying a $50 fee to the bank, and then they only get an amount in their local currency with a $1,900 USD value? Pretty annoyed I imagine.

The reason this happens is because of the poor exchange rates banks give for international money transfers in addition to their high fees. Unfortunately most H1B visa holders are surprised when this first happens because the banks do a good job of hiding it. Luckily there is a way you can ensure your family is getting every dollar they deserve.

Dedicated foreign exchange services offer lower fees and better exchange rates than banks for overseas money transfers. With a company like Xoom or World First, that same transaction would only cost you $5 or $10 and your family will receive the full $2,000 value because their exchange rates are pretty close to, if not matching, the current market rate.

Don’t just settle on losing a large chunk of your money every time you want to send it back home to family. Do the research, check with foreign exchange transfer services, and find out how you can get the cheapest international money transfer.

 

Use Currency Forward Contracts to Save on Large International Money Transfers

If you are looking to save money and get the most out of your international money transfer, consider using a currency forward contract. Most people who send money abroad place what is called a spot trade. This means the trade is executed immediately at whatever the current exchange rate happens to be, but people who regularly send money overseas know that getting a good exchange rate can equal to be savings and luckily, there’s way to ensure that you do.

The problem with spot trades comes from the fluid nature of currency exchange rates. Because the value of one currency against another is always fluctuating, you never know if you are going to get a good deal when the time comes to transfer your money overseas and into another currency. Currency forward contracts aren’t subject to that same problem.

 

What is a Currency Forward Contract

In simple terms, a currency forward contract is a way of locking in an exchange rate ahead of time; before the trade ever happens. This can be very beneficial if you are a person or business that regularly transfers money overseas or know of a large international money transfer need in advance.

A currency forward contract works by connecting two parties in need of exchanging money. This doesn’t mean you’ll actually be put in contact with the other party; the foreign exchange firm will handle all of that. Both parties involved agree to the exchange rate they are willing to accept at a future date, which could anywhere from a single day to a few years in advance. Once the set date is hit, the transaction is executed at the agreed upon exchange rate regardless of the current market rates

 

Benefits of a Currency Forward Contract

Currency forward contracts are a way to hedge against the value of a currency dropping at a later date. It can be incredibly useful if you are working with a currency that has a tendency towards massive rate fluctuations. You can protect yourself against an unfavorable spot trade rate at a future date. It’s a valuable way of insuring a good exchange rate if you are planning a large international money transfer such as a house, property, or business purchase in the future.

Most companies that regularly do business overseas use currency forward contracts as way of ensuring a predictable cash flow and hedging against sudden currency drops which could have negative consequences.

For example, imagine a US importer is doing business with a Chinese manufacturing firm. They have a contract to purchase a large amount of products from the manufacturing firm in six months time and the currency for that transaction will be the Chinese Yuan. If the American importer thinks the value of the dollar may fall against the Yuan over the next six months, he can execute a currency forward contract which locks in a rate to purchase the Yuan in six months time. This leaves the American importer fully protected if the USD depreciates in value.

It works the same way for you if you’re planning a large overseas money transfer in the future. Lock in your rates using a currency forward contract and be assured you’ll get a good value for your dollar when the time comes.

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