There might be many reasons why your small business isn’t thriving. One of them is the global economic crisis caused by the COVID-19 pandemic. However, for all that this recession is hitting all businesses hard, it also kicked e-commerce into high gear. Also, going global has become a necessity for businesses. After all, this gives you an opportunity to both cut costs and grow your customer pools.
But doing any kind of business internationally means you will need to send and receive money transfers from abroad. This itself is a costly endeavor. It’s costly enough that the cost of the transfer might eat up all your profit margin.
While you are developing a strategy for going global, you need to find a way to cut your currency costs. The good news is that today there are companies that allow you to reduce the cost of both the transfer and foreign currency exchange (FX or forex). But you’ll need to think carefully to pick the one that will benefit your business most in the long term.
The costs of foreign currency exchange and international money transfer fees are not the only issues you need to consider if you want to avoid being ripped off while traveling. As a business, making payments to suppliers or accepting them from customers also come with an FX price tag. And that price might be over 10 percent of the transfer volume.
Any small business trying to go global will know that the profit margin for this venture might be so small that 10 percent makes it unviable. But of course, the actual cost of international money transfers depends on many factors. The foremost is what financial institution you are using to make the transfer.
The traditional way to go is to use a bank wire transfer. That’s the safest method of international money transfers. However, it’s also one of the most expensive. For example, in the US the average outgoing international transfer fee is $45. Add to that the money lost during foreign currency exchange. Banks always use an unfavorable FX rate due to their high FX margins. Also, the fees (meaning your losses) might increase with the transfer volume.
Also, remember that some currency corridors to developing countries are far more expensive. There are still some African countries where a transfer can cost up to 20 percent!
Western Union and MoneyGram are hardly better in terms of fees—these services are sometimes more expensive than banks. PayPal is better. However, it will cost you about 5 percent of the transfer and it also doesn’t use the best FX rates.
All in all, the most common international transfer methods are expensive. But now there are FX companies created to solve this specific problem.
While outrageous, transfer fees from banks and popular money transfer services don’t seem that bad for small transactions. However, as these losses grow with the transfer volume, a payment to a supplier or some international investment might end up costing you thousands. You need a specialized and affordable solution for large business transfers. Today such a solution comes from FX companies, also called online money transfer companies. These are companies like Moneycorp, WorldFirst, or OFX.
FX companies specialize in offering cheap and fast currency transfer services. Top providers among them have multiple offices in different parts of the world. The platforms are online-based, which means you can manage your account fully using nothing but a smartphone app.
The number of supported currencies varies depending on the provider. However, all these companies operate using the same principles. They all offer:
FX companies can be used not only to help cut the costs of regular business payments, but they are also a great help to everyone who wants to invest overseas (in property, for example). They can also be used to pay salaries to remote workers.
But bear in mind that not all online money transfer companies are suited for businesses. Only the ones that offer corporate services are capable of handling the paperwork and other requirements that businesses might have.
FX companies not only help you cut the costs of international money transfers, but they can also be used to mitigate currency exposure risk that every international business faces. This type of risk is unavoidable because currency exchange rates are fluid.
However, sometimes this fluidity turns into outright volatility. The COVID-19 pandemic caused a great surge of FX volatility. Tthis volatility will likely last for a while due to the global economic recession. Therefore, FX risks are now extremely high.
FX companies offer their business customers access to hedging tools. This means that you get a chance to minimize these risks with little effort. For example, you can use forward contracts, which allow you to get the FX rate fixed at a certain point for up to a year. So, even if the exchange rate changes unfavorably during this time, you will be protected.
For international business, currency hedging is essential for budgeting. In fact, without hedging against the currency risks in some manner planning a budget becomes almost impossible.
But, of course, one needs to be a financial expert with ample forex experience to use hedging effectively. Otherwise, you will not know exactly when to use which tool to achieve maximum long-term benefits for your company.
FX companies solve this problem as well because they offer not only a wide range of currency services but also guidance. Simply put, they can provide you with advice and information necessary to make good currency decisions. This means that your business won’t have to pay extra to outsource a specialist for this.
The first thing you should consider when looking for an FX company for your business is its accreditation. These businesses operate within multiple jurisdictions and the industry itself is poorly regulated, so you need to choose companies that are audited by trustworthy authorities. For example, WorldFirst is monitored by the Financial Conduct Authority of the UK.
You should only work with companies that are transparent and certified to work in your country. This will limit your choices somewhat as these companies aren't yet found around the globe.
Another important factor is currency selection on offer. You need to be sure that the company you choose will be able to meet all your needs. However, as you can have more than one account, you can work with several companies simultaneously. But in this case, you will need to exercise extra caution when choosing these services.
Finally, be sure to study detailed reviews of every FX company you consider. Read both customer testimonials and professional reviews that highlight both the strengths and weaknesses of the company. This way, you will be able to make a choice that will help your own business prosper.
You can do plenty of things to improve your budget, and it's not all about pain and suffering, as many would have you believe. Everyone has a few things they overspend on. The challenge lies in identifying those particular items and weeding them out. A good place to begin is with restaurant spending, grocery bills, and impulse buying. A wise general philosophy is to assign a destination for every dollar you earn and place that category on your budget. Try cutting restaurant expenditures in half, reducing impulse buys at convenience stores, and shopping for groceries just once each week to regulate what goes toward food items.
If you have any education debt still hanging around after all these years, refinancing student loans through a private lender is a way to lessen your monthly expenses. Not only can you get a longer repayment period, but have the chance to snag a favorable interest rate. But the clincher for money-saving enthusiasts is that your monthly payments can instantly go way down. That means extra cash for whatever you want. Use the excess to fatten savings or IRA accounts, or pay off high-interest credit card debt.
For less than $20, it's possible to chop at least three percent off your utility bills and perhaps much more than that.
Programmable thermostats are easy to install. You don't need special tools or advanced skills. Be sensible about summer and winter settings and you'll see a difference in your electric bill almost immediately, especially during the hottest months of the year. Don't forget to program the device to go into low-use mode while you're away for long weekends or longer vacations.
Although shopping clubs come with annual membership fees, the savings on groceries, household items, and gasoline usually offset them within a month or two of actively using the membership. That leaves the other months of the year for you to save money on household necessities.
For people who drive a lot, shopping clubs with on-site gas stations offer one of the best deals going. Not only do the clubs offer gasoline for about 10 cents off the regular price, but some also offer free car washes and coupons for repair work at participating shops. Although shopping clubs are a win for most anyone, a family of three or more can log thousands per year in savings.
If you have owned your home or car long enough to ride the interest rate waves, you likely qualify for a refinancing agreement. This strategy is excellent for consumers who have better credit now than when they made the original purchase.
Young couples are perfectly positioned to refinance a home after several years of making payments on it. Likewise, anyone who still owes on a vehicle and can get a lower interest rate should look into a car or truck refi. Not only can you get additional months to pay off the obligation, but with a lower rate, you stand to save a nice chunk of money.
One of the oldest, more reliable ways to instantly cut personal expenses is to prepare and take your own lunch to work each day. Not only do you save money by not eating out or buying lunch in the company cafeteria, but you also have added control over what you eat. That means you're doing a favor for your wallet and your health at the same time.
Don't fall into the rut of eating at your desk. Consider taking your bagged meal outside and enjoying the scenery, taking a walk after eating, or joining friends in the cafeteria to socialize.
If you live on or near a bus or light-rail route, do the logistical planning necessary to travel to work at least a few times each week by public transit instead of by car.
Unless you reside in a small town, chances are you have access to buses and trains for commuting purposes. Once you get into a habit of using the public transit system, consider buying a one-month or annual pass, which can represent a major discount on one-time fare prices. Public transportation can take a bit longer to get you to your destination, but it's easy enough to make use of the time reading, catching up on work, or just relaxing.
If you use credit cards to make purchases you can't afford, you're headed for trouble. But if you use your plastic wisely, you can reap real benefits.
If you have a good credit rating, you'll likely qualify for cashback cards that give a percentage of your money back on some or all of your purchases. You can use that cash to pay for a portion of your monthly credit card bill. You could also let your cashback savings accumulate and use it to pay for larger purchases in the future.
Just make sure not to outspend your monthly budget so you're able to pay your credit card balance off in full each month. Keeping a balance on your cards is counterproductive because you'll also be paying interest fees.
At some point, most people experience an unexpected crisis that shakes their financial world. It could be losing a job, receiving a huge medical bill, or having a car break down at the worst possible time. But surviving a pandemic is a situation you probably never thought you would face.
No matter what challenge you’re facing, you’re not the first.
Along with the public health toll, the COVID crisis has put millions of people out of work. For those struggling financially, here are eight critical rules to help you manage money wisely, stretch your resources, and bounce back from this unprecedented health and economic disaster.
Here are the details about each rule to manage a financial setback during the coronavirus crisis.
The key to successfully navigating a financial setback is to be realistic. If you’re in denial and don’t face money troubles head-on, you can quickly compound the damage.
Instead of focusing on the problem, getting angry, or letting stress overwhelm you, channel your emotions into finding solutions. Start talking about your challenges with people and professionals you trust, such as a money-savvy family member, financial advisor, legitimate credit counselor, or an attorney.
Instead of focusing on the problem, getting angry, or letting stress overwhelm you, channel your emotions into finding solutions.
The following financial associations have certified volunteers who can offer free help and advice:
To fully understand your situation, create a list of what you own and owe; this is called a net worth statement. Compiling your data in one place helps you evaluate your financial resources, make decisions more efficiently, and have essential information at your fingertips if creditors or advisors ask for it.
First, list your assets:
Then list your liabilities:
Include the estimated values of your assets, the balances on your debts, and the interest rates you pay for each liability. You could jot down this information on paper, enter it in a computer spreadsheet, or create a report using money management software.
When you subtract your total liabilities from your total assets, you’ve calculated your net worth, which is an indicator of your financial health. It’s not uncommon to have a low or negative net worth when you’re in financial trouble.
RELATED: 10 Things Student Loan Borrowers Should Know About Coronavirus Relief
An essential part of bouncing back from a financial crisis is keeping an eye on your monthly income and expenses. Create a cash flow statement that lists your expected income and typical expenses, such as rent, utilities, food, prescriptions, transportation, and insurance. Again, you can create this report manually or by using budgeting features in a financial program.
Understanding where your money goes is the only way to prioritize expenses and cut all non-essential spending.
Understanding where your money goes is the only way to prioritize expenses and cut all non-essential spending. Making temporary sacrifices will help you recover as quickly as possible with less long-term damage to your finances.
As you review your spending, it’s an excellent time to comparison-shop your essential expenses. Evaluate your highest costs first, such as housing, vehicles, and insurance, since they offer the most significant potential savings.
For instance, you may be able to move into a less expensive home, purchase or lease a cheaper vehicle, and shop your auto insurance to find better deals. Ask your utility provider about assistance programs that offer energy-saving improvements at no charge.
If you haven’t been in contact with your creditors, start a dialog with each one immediately. You’ll come out ahead and get favorable treatment from creditors if you are proactive and honest about your financial troubles. Ask them for solutions, such as deferring payments for several months, setting up a reduced payment plan, or refinancing a loan to reduce your financial burden.
You’ll come out ahead and get favorable treatment from creditors if you are proactive and honest about your financial troubles.
Creditors are likely to ask about details regarding your financial situation, so have your net worth and cash flow statements on hand when you speak to them. Be ready to complete any required assistance applications quickly.
Based on guidance from creditors and finance professionals, prioritize your bills and debts carefully. Your goal should be to conserve as much cash as possible without skipping essential payments. Always pay for necessities first: food, prescription drugs, and auto insurance.
Debts related to child support and legal judgments have severe consequences and should be prioritized
Use your net worth statement to rank your liabilities from highest to lowest priority. For instance, debts related to child support and legal judgments have severe consequences and should be prioritized. Keeping up with an auto loan is a high priority if you rely on your vehicle for transportation. Federal student loans are in automatic forbearance through September 30, and the relief may get extended through 2020.
Your unsecured debts—medical bills, credit cards, and private student loans—are lower priorities. Never pay these debts ahead of rent, a mortgage, or utilities when you have a cash shortage.
Prioritizing your debts means some may be paid late or not at all. If a debt collector contacts you about a low-priority debt, such as a medical bill or credit card, don’t allow them to persuade you to pay it before your highest priority bills.
Collectors may try various aggressive tactics, such as threatening to sue you or ruin your credit. A lawsuit could take years, and a creditor is more likely to negotiate a settlement with you. Remember that a creditor or collector can’t send you to jail for civil debts.
If you are behind on bills, that fact is likely already reflected on your credit reports. By the time a collector contacts you, the damage is already done, and paying the bill won’t improve your credit in the short-term.
If your income and savings have entirely dried up, use these resources to learn more about local and federal benefits.
Financial challenges can cause you and your family to experience a flood of emotions, including anger, fear, and embarrassment. As difficult as it might be to put a financial crisis into perspective, it’s critical. No matter what challenge you’re facing, you’re not the first. There are millions of people who are dealing with COVID-related financial hardships.
Face the fact that your recovery could take a while. Do everything in your power to manage your budget wisely by getting organized, seeking ways to earn more, and spending less. Don’t be afraid to ask for help from creditors, seek free advice from professionals, and take advantage of every local and federal benefit possible.