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My Blog - The Import Guide

Discussion in 'Import & Export' started by Import Expert, Dec 11, 2013.

  1. Import Expert

    Import Expert

    Joined:
    Oct 6, 2011
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    3,331
    The importance of foreign exchange conversions in the Import process

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    Guest post by Matt Richardson, founder of betterFX

    As anyone who has done it knows, importing from around the world has challenges and all kinds of costs that need to be combined to give you the overall cost of your venture. Most of these costs are visible and directly measurable.

    Apart from one that is. Foreign Exchange cost.

    To explain this, let’s consider importing an item for $1,000 per unit from the US. (Ignoring other add on costs for now, just to keep the example simple)

    In our example, you have to pay the suppler in US $, so your bank (or other FX provider) gives you an exchange rate to pay from your account in GB £, of say £1 = $1.50, so $1,000 is going to cost you £666.66. All very clear and transparent so far. Yes?

    Sort of. You certainly now know how much that item in the US is costing you in GB £.

    But what if you could have got a better exchange rate…say 1.53? Then your price in GB £ would have only been £653.59. This would have reduced your costs by £13.07 a unit. (An extra 2% profit).

    Most banks and non-banks are in the game of looking to make as much money on this FX ‘spread’ or margin as they can. If they sense you are not right on top of where the FX market is and how it works, many… dare I say most, will look to exploit that at your cost.

    The big high street banks in the UK that most of us bank with are totally inflexible about FX rates and other fees and unless you deal in millions in your FX transactions. So you will just have to take it or leave it. Credit cards are the same – no room to negotiate the FX rate applied at all.

    NOTE – Don’t be fooled if they say they can charge you in your local currency. That just means they do the FX first so you don’t see it at all.

    This is where specialist FX companies such as betterFX come in. They can save you money by negotiating the rates down to as low as possible, to save you money. Visit their web site to find out more, and send an email via the ‘contact us’ page with any questions you may have.

    Here is another TOP TIP. Suppliers in say, China may offer you the option to pay in your own currency, such as GB £. So no foreign exchange costs, right? Wrong.

    They will increase the cost per item to cover THEIR foreign exchange cost, except by much more than their base cost. It is not unusual to see a 10% higher cost, even though they may only be paying 1% for the FX (or less). That is just extra profit for them and extra cost for you.
    iKam likes this.
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