Volatile exchange rates top concern for SMEs
CURRENCY fluctuations is the top concern for SMEs trading internationally, according to a report by American Express (AMEX).
The study found that around 36% of firms are concerned over currency changes, followed by red tape and legislation (11%), payment problems (11%) pricing (9%) and language (7%).
However, although around two fifths of UK firms now conduct international business many don’t protect themselves against fluctuating exchange rates.
AMEX suggests that SMEs could potentially be putting themselves at risk of losing up to £41,000 a year. Collectively the UK economy could be set back by an estimated £24bn a year in missed savings.
Around 30% of respondents said that the hadn’t considered protection while one in five said that thought that administration hassles outweighed any benefits.
A further 13% were unclear on the benefits.
Rocco Magno, director of FX international payments at AMEX, said:”UK business abroad is a big opportunity, however trading internationally can often be a complex process, and it’s therefore not surprising that 15% of SME business leaders who do regularly trade internationally say they find it difficult or extremely difficult to navigate the international payment process.”
He continued: “However, with so much capital potentially at stake, it
is imperative that SMEs seek the right guidance in order to help manage
their financial risk as much as possible. This is not only to protect
themselves against negative currency fluctuations but more importantly to
enable them to have increased foresight and control.
“For example, by purchasing a forward contract and locking in the best exchange rate at a specific point in time, business leaders are able to manage their cash flow and plan ahead more effectively, and in today’s market, foresight can
give the edge over competitors.”
The report showed that nearly half of SMEs (47%) are dedicating between two and five working days per month to the process.
Currently only 19% of SMEs utilise a foreign exchange specialist to manage their international payment process online.
According to AMEX up to 81% of SMEs could potentially be missing out on the time efficiencies by online platforms as well avoiding costly investigations on payments.
