Businesses of all sizes operating in global markets are finding that rising costs are squeezing profit margins.
Between Brexit and the US-China trade war, there have been challenges for businesses of all sizes who import or export goods and services across the world. In addition, the uncertainty in the global picture is causing greater volatility in the currency market. Since the Brexit vote, the pound has been weakened and continues to fluctuate. While the value of the pound has the advantage of making British goods more affordable overseas, these rates aren’t fixed and so there is the risk that if the pound recovers, a business could be priced out of the market.
Price pressures on imports
The cost of goods from overseas has increased due to the weakened pound and this has left businesses with a difficult choice – raise prices for customers or accept a smaller profit margin. While it may be possible in the short-term to maintain prices with the hope that the currency market improves, there are no guarantees. This is a risky strategy and may mean that in the longer term, if the pound doesn’t improve, then sharp increases in prices are required.
Finding a solution to price pressures
While it’s not possible to control the outcome of major political challenges such as Brexit or the fluctuations in the value of the pound, there are ways to control your costs overseas without putting prices under pressure. A currency specialist can help you assess the impact of currency fluctuations on your profit margin and help you devise a strategy that helps you manage the risk. Your business may benefit from a forward contract, which allows you to fix a prevailing rate for up to two years. (Please note, a forward contract may require a deposit.) However, it’s worth noting the rate may improve, so a market order which allows you to specify a rate higher than the current market at which to buy currency, may be of benefit. You can also specify the lowest rate at which you can exchange currency to protect your margins.
Expert currency guidance and services for businesses
If you are concerned about how the value of the pound is impacting your profit margin and your product pricing, a currency specialist can help you mitigate the risk. The current environment has put prices – and businesses – under pressure but a clear currency exchange strategy can help you manage your costs in a global market. As well as offering great rates and a range of products to manage your international payments, moneycorp has expert consultants who specialise in industry sectors and take the time to understand your business. Get in touch with us today