Debunking Common Myths & Misconceptions About Online Money Transfer

13-08-2020 | treasuryXL | XE |

Online money transfer can be confusing. Luckily, we’re here to clear things up for you.

If you’ve never sent money online before, it can seem pretty confusing. You enter in your information from your home, on your computer or on your mobile phone, and your money somehow travels from your bank account to your friend’s on the other side of the world.

There’s quite a lot of information online about money transfer, but unfortunately, not all of it is accurate. Been doing your research, but not sure what to believe? Let us help you out. We’re going to share some of the most common misconceptions about online money transfer, and then let you know what’s really the case.

Myth #1: You should check the exchange rates and send money at a particular time of day.

We’ve discussed this concept before, but we think it bears repeating: the time of day you check the rates has absolutely no bearing on the rate that you’ll get. The global currency markets never sleep, and it’s likely that at any given time, something is happening that could affect the value of your chosen currencies.

There’s no objective “best time” to send a money transfer. That’s going to depend entirely on the values of your chosen currencies, and since those can change at any moment, it’s not going to be easy to determine when the rates will be in your favor. You can study the markets, but you can’t predict the future!

If you are interested in knowing the best time for your transfer, you can set up Rate Alerts for your currency pairs that will alert you when your target rate has been reached.

Myth #2: You’ll always get the same rate, so you don’t need to shop around.

On the other hand, some people think that checking the rates is little more than a formality. After all, global currency values are the same around the world, so wouldn’t the exchange rate always be the same?

You would think so, but that’s not quite the case. While the mid-market rate is the exact midpoint between a currency’s buy and sell rate (also commonly referred to as the “true rate” of exchange), not every provider offers you the mid-market rate. Many services (including banks and wire transfer providers) add margins onto their rates that will benefit them. And it’s not always made clear when you look at their rates. So before making a transfer, check our Currency Converter to see what the real rate of exchange is. You could be surprised!

Myth #3: Online money transfers aren’t as secure as bank and wire transfers.

We get it. You trust the bank to hold your money, so naturally you’re going to turn to your reliable local bank and think that they’re the most trustworthy organization to handle your money transfer.

Banks are absolutely trustworthy, but they aren’t always the best choice for handling money transfers. In addition to the unfavorable exchange rates that we already mentioned, service fees and limited working hours could lead to you paying more money for a slower money transfer.

Additionally, online money transfer providers are no less secure than the banks. At Xe, we have enterprise-grade security measures in place and adhere to regulatory standards in every country that we facilitate transfers for.

Myth #4: Money transfers are complicated and take a long time to execute and complete.

This can be broken down into two separate thoughts:

  1. The money transfer process is confusing, and it’ll take you ages to figure out how to send money.

  2. Once you’ve sent your money, it’ll take days or even weeks for your money to reach its destination.

Both false!

Signing up for an account is completely free and takes just a couple of minutes. Once you’re registered, you’re ready to start transferring, which can be initiated in just a couple of minutes online or on the phone. Want to make the process even easier? Take a look at this list of everything you’ll need to make a transfer, before you start the process.

Additionally, online money transfers travel pretty quickly. Because you’re not working within bank service hours, you can initiate a transfer any time of day, any day of the year, and your money will reach its destination quickly. At Xe, our transfers take within 1-4 business days, often arriving within 24 hours, sometimes even within minutes.

Myth #5: Money transfer is expensive.

You will need to provide the funds for your transfer. But when it comes to additional costs, online money transfer is no more expensive than a wire transfer or bank transfer—it’s often less expensive. Between the straightforward rates and lack of excessive fees, what you see is what you get when you make an online transfer.

 

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multi billion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

 

 

 

Financing and FX; The fundamental concepts

10-08-2020| Niki van Zanten

Each field of expertise has some fundamental concepts that the decision makers tie to as general rules of thumb. For example, a purist chef might stick to a maximum of 5 ingredients on each plate, a winemaker might say only grapes and nothing else, and another winemaker might say any trick goes as long as it feels the wine.

The treasury purist might say the fundamental concept that should be applied and/or benchmarked is to get as close to a zero sum game as possible. I personally tend to agree with this concept, taking into account it’s not a pure mathematical equation. A zero sum game in Treasury would mean looking beyond one pillar of treasury (I would even recommend to look beyond the treasury scope once in a while and why not, even look beyond scope of just your company), and thereby combining the outcomes of a solution across multiple pillars and see if they balance out.

Today we will take a stab out doing that for FX and Financing. Below topics give some insights in when to apply and what to look at for:

  • External Financing in Foreign Currency
  • Internal Financing in Foreign Currency
  • FX swaps
  • Conclusion

External Financing in Foreign Currency

Interest rates not only fluctuate but also have different (base) interest rates per currency/country. In general, the all in interest for financing consist of a base rate for a certain tenor and the bank spread based on perception of customers credit. At first glance it might seem interesting to look at financing in a low interest rate currency.

A few years ago many home owners in Poland used EUR mortgages to fund their homes reducing interest cost by a few percent. This of course is not a saving, even though the interest cost were lower, in return they received a FX risk on EURPLN. In case a forward (sell PLN buy EUR) would be used to eliminate the FX risk it would not only wipe out the interest benefit but also bring additional burden in terms of administration, settlements and understanding the complexity of the structure. One of the complexities of the forward is even a credit component, so the point here is, in order to really see the zero sum game picture and its leakage (spreads, out of pocket expenses etc) things can get tricky.

Internal Financing

In most scenarios internal financing is a pass through and in principle it works the same as external with a back to back leg (albeit in a netting scenario). It does open a new array of choices. The more basic choices to put the (internal) FX risk, which tenors to use, accounting classification and perhaps even do everything back to back with a bank or take some risk on the books. In terms of currency and where to put the FX risk, the most straight forward option is to use the currency is which the predominant cash flows occur. You can also choose to centralise all your FX exposure at HQ but this could cause the accounting books to look different then the economics. In any case, with any back to back transaction in general the golden balance sheet rule should apply, ie duration and conditions internal need to match external, unless you choose to have risk on your books.

FX Swaps

FX swaps (buy and sell currency for different value dates) are commonly referred as FX instruments, but in my view they are pure financing instruments. They can be used to hedge the FX on a loan or to adjust timing of cash flow or related hedges which are both financing related issues. When a swap is executed to spot reference on both legs is equal and therefore the pricing is pure interest based. Swaps can be a great way to fine-tune interest rates as forward prices tend to be closer to interbank then to manage through typical cash management products like loans and deposits. The trade-off can come in the form of a little extra work and basic knowledge is needed, but I would argue the same understanding is required when using a bank solution which has swap incorporated such as cross currency pools.

Conclusion

The FX market at first sight provides an excellent way to obtain close to interbank interest rates. Use it wisely and make sure you have a deep understanding of the situation. There are also many good reasons to choose a simple “plug and play” solution when looking at financing elements. As always, if you care about your funding and cash flow the understanding required for keeping it simple is no different than the understanding required for an outsourced (bank provided) solution. So either way, don’t do what you don’t completely understand. A chat with an expert and/or asking the right questions to your banking partners (don’t be shy to ask for the motives of the solution that is offered) will get you on the right path.

I am curious about your thoughts. Please comment…

 

Niki van Zanten

FX specialist

 

Are There Risks to Conducting International Business in USD? Part 2: Importer and Exporter Scenarios

06-08-2020 | treasuryXL | XE |

In the second part of our blog series on transacting international business in USD, we take a closer look on how it can impact importers and exporters.

American companies continue to turn to international trade as a preferred method for growing sales or controlling costs. According to 2019 World Trade Organization data, international trade comprised 25% of the United States’ GDP, split between $3.1 trillion worth of imports and $2.6 trillion in exports.

Despite one-quarter of the U.S.’s GDP coming from international business, many American companies continue to transact all their international business in USD.

Why is this?

One primary reason is that certain industries have USD-functional supply chains – such as aspects of energy, agriculture and aerospace – have USD functional supply chains. Transacting in a foreign currency could be introducing FX risk.

However numerous other global industries are not USD-functional, and many American companies still choose to transact in USD.

Industry surveys reveal that two of the most common reasons cited are either:

  • A lack of FX risk awareness at the company

  • A management decision to transact in USD as this is easiest for their business.

Unfortunately, these decisions often result in the unintended consequence of transferring FX risk.

Keep in mind all international cross-border transactions, when the two counterparties have different functional currencies, have FX risk, even if priced in USD. One party must bear the FX risk and when an American company requests to transact in USD, that company is transferring the FX risk to the counterparty.

The Real Cost of Transacting in USD

To quantify the “cost” of transacting in USD, we’ve considered two trade scenarios:

  • A U.S. importer transacting in USD with both a Chinese and European supplier

  • A U.S. exporter selling in USD to both Chinese and European customers

Looking at the 2-year EURUSD and USD-CNY charts below, the Chinese Yuan varied 12% against the USD and the EUR varied 10.2% versus the USD. This variance is the “cost” transferred to Chinese and European companies and it impacts both importers and exporters.

Chart illustrating the exchange rate from Euro to US Dollar from 24 July 2018 to 23 July 2020.Chart illustrating the change in exchange rate from Chinese Yuan to US Dollar from 24 July 2018 to 23 July 2020

A Deeper Dive into Importers

U.S. importers cite many reasons for choosing to transact their international business in USD. Each of these reasons has merit and may be appropriate for a company’s unique situation.

  • Industry standard: certain industries have USD-functional supply-chains.

  • Ease of doing so: “we’ve always done it this way”.

  • No other options: a lack of multi-currency accounting systems.

  • Supplier’s choice: the supplier says it wants USD.

  • First-time global trader: pricing in USD to focus on other trade risks.

Regardless of the reason, it does not alter the reality that:

  • Paying for imports in USD to a foreign supplier that is not USD-functional is transferring FX risk to the supplier, and

  • The supplier will need to be compensated for taking on the FX risk, most likely padding their USD price.

To illustrate the FX risk impact, the grid below shows the local currency impact of a USD payment to the Chinese and European suppliers.

Grids showing the local currency impact of a USD payment to Chinese and European suppliers

Did this FX risk impact the pricing the American importers received? 

Many importers report that their suppliers often change their USD prices—some say frequently—and almost always increase them. The most likely reason is FX. The supplier, converting the USD payable to local currency, is no longer receiving enough CNY or EUR to maintain their margins—thus, they ask for more USD. This most often happens when the USD weakens.

What Can a Company Do?

Many companies have adapted to this reality about FX risk even when paying in USD.

Some of the solutions we have seen in the marketplace include:

  • Companies asking for dual-currency invoices

  • Proactive companies paying suppliers in CNY or EUR, even if they are invoiced in USD

  • Companies asking for FX risk-sharing agreements

  • Companies embracing FX risk management and requesting local currency invoicing

A Deeper Dive into Exporters

Exporters also face the inherent FX risk in global trade as their end customers are most likely not USD-functional. Nonetheless, many U.S. companies still price their exports in USD. The most common reasons cited for this include:

  • Industry standard: i.e. USD-functional supply chain

  • No other options: accounting/ERP systems not multi-currency compatible

  • Convenience: ease of doing business to the American company’s staff

Again, regardless of the reason cited, it does not alter the reality that a company pricing its exports in USD is transferring the FX risk to the buyer. The buyer experiences the variability in the FX spot rates and will most likely:

  • Demand price discounts, or

  • Choose to buy from a competitor willing to price in their home currency

The grid below illustrates the FX risk impact transferred to the Chinese or European buyer over the last two years by the American exporter, as a result of pricing in USD.

Grids showing the FX risk impact transferred to the Chinese or European buyer over the last two years by the American exporter, as a result of pricing in USD

Has this FX risk impacted your sales or revenue forecasts?  

Many exporter sales staffs know that pricing in USD is often uncompetitive. Their biggest risk is a strengthening USD as this makes their product or service more expensive. An exporter’s sales management must weigh the costs versus benefits of transacting in USD. The risks are:

  • Uncompetitive pricing: a stronger dollar makes their product or service more expensive.

  • Payment delay risk: customers that don’t hedge may try to wait for the FX rate to improve.

  • Profit margin risk: sales teams may need to cut prices to close the sale.

  • Lost sales revenue: buyers may choose a similar product or service from competitor willing to price in local currency.

What Can a Company Do?

Many companies have recognized these market conditions and taken actions to adapt to their international customers’ needs. Strategies have included:

  • Offer pricing in local currency and take on management of FX risk

  • Offer hedging on behalf of suppliers that cannot

  • Offer risk-sharing pricing agreements

  • Open local sales offices to build stronger relationship

Wherever you are on this journey to transacting in foreign currencies, the Xe Corporate Team can be your partner and help your company manage its FX risk and international business.

Get in touch with an Xe expert and we’ll help you:

  • Analyze dual invoicing

  • Make and informed decision

  • Upskill your team and reap the benefits!

 

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multi billion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

 

 

 

Are There Risks to Conducting International Business in USD? (Part 1 of 2)

30-07-2020 | treasuryXL | XE |

American corporations often transact their international business in USD because they believe it eliminates FX risk. Unfortunately, this is a false sentiment.

When it comes to international business, American companies have a global advantage. The U.S. dollar (USD) serves as the world’s reserve currency. This has created a global demand for dollars and led to certain industries (e.g., energy) being globally priced in USD. Because of the USD’s global status, many American companies transact all their international business in USD—but this may not always be the best move.

American corporations—particularly smaller and middle market companies—often elect to transact their international business in USD because they believe it eliminates foreign exchange (FX) risk. Unfortunately, this is a false sentiment.

Pricing transactions in USD does not eliminate FX risk. Instead, it merely transfers it to the trade partner, because the trade partner most likely operates under a different functional currency.

When to Price in USD

When deciding whether to transact in USD, a company needs to examine its business operating environment. There are instances when pricing international business in USD is a valid strategy for a U.S. company.

Two examples of this are:

  • Industry standard: certain industries have long-established USD-functional supply chains. Some examples of these industries include aspects of energy, agriculture and aerospace.

  • First-time global traders: new entrants to global trade have other risks to prioritize over currency risk (such as counterparty risk, quality of goods, shipping, payment, and more).

Why Do US Businesses Price in USD?

Even though a vast majority of industries are not globally USD-functional, many American companies still transact their international business in USD.

The most common reasons cited for this include:

  • Perceived FX risk avoidance

  • Ease with current process

  • Internal system incompatibility

This set of circumstances falls under managerial influence. A company that continues to transact global business in USD under these reasons has made a business decision that the ease of transacting in USD outweighs the potential benefits of transacting in local currency.

However, what these companies need to understand is that transacting their global business in USD can also come with hidden costs or risks.

The Cost of Pricing in USD

American companies transacting globally in USD may be exposing their business to potentially higher costs or reduced sales and margins.

Why?

Because their trading partner is most likely not USD functional, making the USD payable or receivable a foreign currency to that company. The foreign company will need to be compensated for absorbing the FX risk; to do so, they will likely “pad” prices to U.S. importers or demand price discounts from U.S. exporters.

Industry studies estimate the cost to U.S. businesses can range from 2%-10%. Importers face inflated pricing and payment delay risk. Exporters face uncompetitive pricing, reduced margins, possible payment delays or, worse, potential lost sales.

Management Taking Control

In a globally competitive marketplace, it is prudent for a company to question why it transacts its global business in USD. Is it industry standard? Or a lack of internal knowledge and inadequate systems?

As companies strive to grow revenues and reduce costs, it is possible that transacting business in USD is having a negative effect. Is the purchasing group overpaying for goods? Has the export sales team experience lost sales to competitors pricing in local currency?

At Xe, we work every day with companies doing international business. We understand the challenges companies face when transitioning to pricing their international business in foreign currency. Wherever your business is on this transition journey, the Xe Corporate Team can be your partner and help your company manage the FX risk component of international business. Visit our Business page for more information about our products and services.

To learn more about the costs to American companies for transacting in USD, understand how this impacts importers and exporters, and see some solutions other companies have tried, stay tuned for the Part 2 in this series.

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multi billion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

 

 

 

Planning a Large Purchase? Tips for Saving

23-07-2020 | treasuryXL | XE |

When there’s a lot you need to save, it can seem daunting, and you might not know where to start. We want to help you with your savings plan.

Most of our purchases are pretty mundane. Think about the purchases you’ve made this week. They were probably more along the lines of swiping your card at the gas pump and paying your bills online than the lines of booking an extravagant trip or buying a new vehicle, right? But every so often, we will make those larger purchases.

Whether it’s a solid investment for your family and lifestyle (like a home) or a well-deserved bit of fun (like a hot tub), these purchases won’t be as easy. You may have enough saved up to make this purchase right now, but it’s more likely that this purchase is going to require a bit of saving.

When there’s a lot you need to save, it can seem daunting, and you might not know where to start. We wanted to share some of our tips to simplify the saving process for your next exciting purchase.

1. Figure out your timeline and use it to create your savings plan

Depending on the type of purchase that you’re making, there may be a specific date by which you’ll need to make your purchase. Even if you aren’t working towards a set deadline, it’s a good idea to set one for yourself so you can determine how much you want to save each month.

If there’s no rush, you can base your savings plan on how much you can comfortably put away each month, without having to make any changes to your current spending habits. But if you have a target date for your purchase or you’d prefer to shorten the process, read on to see how you can save more each month.

2. Make a separate savings account for this purchase

You may already have a general savings account (and if you don’t, try to open one as soon as possible). But creating a new savings account just for this purchase has a few benefits:

  1. You can visualize how much you’ve saved more quickly and easily;

  2. You won’t be tempted to pull from your emergency savings or other important savings (and vice versa);

  3. You can utilize accounts, tools, and services that you might not be using with your current savings account.

When you open this new savings account, take advantage of this opportunity to shop around your bank’s offerings or even other banks’ accounts. Some banks offer financial planning tools that can help you with your savings, or you could find a bank or account that will generate greater interest on what you’ve saved. Don’t just go with the first option available; take time to find the one that best suits your goals.

3. Reassess your budget

In general, you should revisit your budget on an annual basis, or any time you experience a change in your life or financial circumstances (such as starting or losing a job or combining finances with a spouse). Creating a savings plan is another time when you should take another look at your current spending. Determine how much you could comfortably put away each month, and how long it would take you to save at that rate. If you’re not happy with that timeline, try making a few changes to your budget to improve the efficacy of your savings.

There are some expenses that you can’t cut from your budget. Even when you’re saving up for a big purchase, you’ll still need to pay your bills, buy groceries, and put gas in your car in the meantime. But look at the subscriptions you pay for and the non-essentials that you buy and consider whether you need to budget for them

Even for the essential purchases, small changes like switching from name brands to generic, buying used, or comparison shopping online can add up to increased savings.

Need another currency for your purchase? Consider an Xe money transfer

You could be purchasing property in another country, or you could be making an investment. In these cases, your payment would. Sure, you couldjust make a card payment and let the exchange sort itself out in the payment process, or you could make a wire transfer. But when it comes to large purchases, there are a few unique advantages to using money transfer for your transaction.

When you’re exchanging a large amount of currency, the exchange rate can make a big difference in how much you need to provide. If you pay with your card or make a bank or wire transfer, your transfer will be made at their exchange rate. These exchange rates often come with hidden margins or are designed to favor the provider over you, meaning that you won’t get as much bang for your buck.

If you make your transaction through a money transfer provider, on the other hand, you can check the rates ahead of time and get a rate that you know you’ll be happy with. If you transfer money with Xe, you can guarantee that you’ll get a fair, honest exchange rate that comes from the live currency markets, with no hidden margins.

If you’re not on a time limit, there are a few tools you can take advantage of to ensure that you’ll get the best rate possible for your transfer. You can set a Rate Alert that will let you know as soon as your desired rate is live, or if you have the funds you can set a Market Order that will automatically purchase your currency when your ideal rate is live.

Or, if the rates are currently in your favor but you lack the funds or don’t want to make your purchase right away, a Forward Contract will allow you to lock in the current exchange rate and make your exchange or purchase at a future date.

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multi billion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

 

 

 

5 Signs Your Budget Needs a Rethink

16-07-2020 | treasuryXL | XE |

We’ve all got some sort of a budget. Whether you’re the type to keep an immaculate record of every bit spent down to the last cappuccino or you prefer to keep a more general list of priorities for each paycheck, everyone has some kind of methodology for how they choose to spend their money. How did you create your budget? And when did you create your budget? Odds are, your current circumstances aren’t exactly the same as the circumstances in which you first created your budget, and that could warrant a revisit. In general, you should review your budget at least once per year. But that’s the bare minimum: if you’re experiencing any of the following with your budget, it might be time to take another look.

#1. Your income, expenses, or goals have changed.

These three things are the bare-bones basics of any budget:

  • How much money you earn each month
  • How much money you need to spend each month
  • How much money you want to put into savings each month

You’re free to add other features as you please, but those are the fundamentals. A change in your income (such as starting a new job or getting a raise), a change in your regular spending (such as paying off a debt or adding a new expense), and a change in your goals (such as deciding to save for a home) will impact how you budget. Maybe now you can afford to increase the amount that goes into your savings account each month, or maybe you’ll need to cut your spending to account for your new expenses.

Don’t wait until things become problems: as soon as your finances change, make the changes in your budget to reflect them.

#2. You can’t afford it.

Some things are out of your control, and there might be periods where you’re in a tight spot, financial. But during ordinary times, if you find yourself:

  • Living paycheck to paycheck
  • Regularly spending more than you earn
  • Frequently dipping into your savings
  • Habitually relying on credit cards to cover necessary expenses
  • Not being able to consistently put money (any amount) into savings

…then your current budget isn’t working for you.

Take a look at your budget and see why these things are happening. It could be as simple as setting up an automatic deposit into your savings account each month. Or, you might need to critically examine your spending habits and reallocate your monthly income.

#3. It’s too restrictive.

Keeping a specific, organized budget isn’t a bad thing. But budgeting yourself so tightly that you don’t have any wiggle room can lead to trouble later on. Do you have the emergency funds to purchase a new dishwasher or make unexpected repairs to your car or home? Or would you be forced to dip into your retirement savings or take out a loan.

It’s important to save and spend responsibly, but allowing yourself the leeway for an occasional takeout meal or latte won’t derail your financial future (unless you genuinely don’t have the funds for these things). When it comes to your budget, you should feel disciplined, not restrained.

#4. You’ve noticed some unfavorable patterns in your spending.

Some spending is inevitable. You know you’ll always need to spend a certain amount on things like rent, mortgage, utilities, bills, and groceries. Once you’ve taken care of the essential spending and your savings, you’ll hopefully have a bit left over for fun, frivolous, and miscellaneous purposes.

Take a look at your nonessential spending too. It’s normal to spend a little more than usual during the holidays, for example, but are you consistently going over budget on things like online shopping, nights out, or takeout food? If you’re spending more than you can afford on these things, it’s time to reassess: either reallocate your budget to account for more spending, or make the choice to reduce the amount you spend.

#5. You’re stressed.

Finances are a common worry for people all over the world. But if you’re constantly stressing about whether you’ll be able to pay your bills at the end of the month, or stay up late each night worrying about potential disasters that could empty your bank account, making some changes to your budget could help you to find peace of mind and feel more comfortable with your finances.

Source

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multi billion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

 

 

 

Going Cash-Free: Is it Right for You?

09-07-2020 | treasuryXL | XE |

Let’s try something. Reach out to your friends, family, or roommates and ask if anyone has $50 they could loan you. Did anyone have that much money on them? Or did they say that they needed to go to the bank, or ask if they could electronically transfer you the money?
In recent years, it’s become increasingly common for people to not carry cash around with them, or to just carry a little bit in the case of emergencies. While there are exceptions, the majority of consumers have moved to using their credit and debit cards and other forms of electronic, cashless payment.

At the end of 2019, 70% of consumers in a survey answered that they preferred card payments to cash, with 38% of card users citing inconvenience as the main reason they preferred cards to cash. And it’s not just consumers who are looking to go cashless. Corporations like Starbucks, Sweet-green, and even Amazon have all implemented cashless measures at their physical locations. Whether you’re tired of the inconvenience of cash, want to keep track of your transactions, or you’re worried about the possibility of your cash carrying germs, you may be considering taking your payments completely cashless. Let’s take a look at what that could mean for you going forward.

Why go cashless?

Many people around the world have enjoyed the benefits of transitioning away from cash and toward electronic payment methods. These are some of the most popular reasons for making the switch:

  • It’s convenient. No more lugging that heavy wallet around, and no more digging around trying to find the right bills. If you’re short on time and want a quick transaction, all you need to do is swipe a card.
  • It leaves a paper trail. Does anyone keep a record of every single time they pay with cash? When you pay electronically, on the other hand, you have a built-in record of everything you’ve purchased, when you purchased it, and how much it cost. If you’re trying to budget, this makes it easier for you to see exactly how much you’re spending and where your money’s going. Or if your balance is lower than you expected, you’ll be able to see where the money went—or if your account information has been compromised.
  • Some cards come with benefits.From discounts to rewards, cash-back points, airline miles, and more, using your card frequently now could bring you a lot of benefits in the future.

Why you might want to keep a little cash

Even as technology continues to advance, it’s not likely that cash is going anywhere anytime soon. 88% of surveyed consumers stated that they still use cash sometimes, and here’s why:

  • Data security and privacy are a concern. With technological advancement comes new data security worries, and the world of payments is not an exception. E-commerce sites can be breached, and card information can be stolen. Or, after buying online, you might start seeing targeted advertisements based on your purchase and search history.
  • Cashless payment isn’t always a guarantee. Some vendors (particularly smaller, local businesses) only take cash. Or if they accept card payments, they might have a required minimum or add a small additional service fee to the transaction. Or maybe a store or restaurant’s card reader could go down for the day, and you’ll need to find an ATM. It might be small now, but these fees can quickly add up—and your card might end up being more of an inconvenience in these establishments.
  • You could spend more! When you have cash in your wallet, it’s easy to keep track of how much you have left, and how much you’ve spent. When all you need to do is swipe your card, it can be easy to lose track of what you’ve purchased and what’s left in your account.

Could my cash be contaminated?

In the wake of the global COVID-19 pandemic, this has been a question on everyone’s minds. Can cash carry the virus? Which payment method is the least likely to put you at risk of cross-contamination?

You’ve been told to try to avoid coming into contact with high-touch surfaces (such as door handles, handrails, and tables). Since cash frequently changes hands, you might be worried about the chances of your money carrying some harmful germs.

It’s true: coins and bills can potentially carry viruses, bacteria, and other pathogens. It’s not the most common method of transmission, but it can potentially happen. If it gives you peace of mind and makes you feel less anxious about the possibility of cross-contamination, prioritize electronic payment and card payments, since your credit and debit cards can be wiped down. If you do need to handle cash, wear gloves if possible, and always wash your hands after coming into contact with new, potentially infectious objects.

In conclusion…

From buying a house to transferring money overseas, there are a few situations where paying with cash obviously isn’t the best move. If you enjoy the convenience of electronic payments and want to make the transition into a completely cashless lifestyle, you’re not the only one ready to make the switch. As long as you know what works for your purchases and your lifestyle, there’s no reason not to explore alternate methods of payment.

Source

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multi billion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

 

 

 

Accounting for FX; the Do’s and Don’ts

08-07-2020 | Niki van Zanten

Let’s start by mentioning a phrase that I hear regularly and, to be honest, also use myself: ‘I am not an accountant, but…..’.
The urge to mention this phrase (usually targeted to an accountant while having an ‘I know it better’ attitude), can perhaps be traced back to the following reasons:

  • Discrepancies between accounting and real economics;
  • The fact that some (from my perspective, way too many) companies are run by accountants and numbers;
  • Historically absurd requirements in terms of hedge accounting*.IFRS on paper brought some relief but the old FAS and IAS standards were over the top accounting driven without a mere grasp of the real world.

The first point could already result into great discussions. As companies are expected to adhere to certain accounting standards, these standards represent the objective part of these discussions. This results in real economics claiming an underdog position.
If companies have to choose between compliance on one hand and doing what works best economically on the other hand, the way to find the right balance is by training accountants about real economics. Many individuals working in treasury have an accounting background, which could be beneficial if that individual takes the economic approach and uses accounting knowledge convince business partners.

Let’s jump into some basic examples where accounting doesn’t reflect economic reality:

  1. IC (inter company) bookings where the transaction is not reported in the same currency at both ends

Entity A (EUR Functional) has a receivable of 1 Mio EUR and entity B (USD Functional) has a payable of 1.1 Mio USD. The Historic rate was 1.10 and cash flow occurred in USD. Entity A decided to book in EUR to avoid any FX reporting. The consequence is that there is indeed no FX exposure visible. However upon settlements all FX results suddenly appear.What a nasty surprise!

  1. Re-measurements not done at correct rates

The best indication for FX effects in your books is obtained when the applied rates are close to the market rates. As you know there are many different sources for markets rates.  The awareness of this fact is not visible in accounting.

  1. Forward points not segregated

If you do not segregate forward points in PL, you can have FX results when the currency in question does not move. That just sounds very strange to me and this also touches upon a bigger issue, namely the allocation of result on PL. In the case your FX does not land in a segregated PL line, or worse non-FX related results end in your FX PL,
this usually does not change the total PL. However this makes it extremely difficult to control FX results, as you need good exposure information as well solid controls in terms of realized results. Segregation of realized and unrealized FX is also a very helpful tool for the Risk manager.

Are companies run by accountants?

That question should be discussed over a beer or glass of wine. Right now, I will limit myself to some pointers on how to identify whether a case could be identified as an accounting issue or economics issue. It is actually very simple and should be done by treasurers and financial controllers, before any discussion occurs on what the actual problem is.

By comparing the accounting steps for each of the proposed solutions with the trades, you can identify where market risk arises and where accounting risk. The one can see that thes are not always the same. Furthermore, it might also be a good time to call for a specialist, if the right level of comfort is not met. This way of working also fits well with the absurd requirements of hedge accounting.

Regarding this topic, ask yourself whether you really need to apply hedge accounting. From my experiences, in most cases hedge accounting is applied only for one reason; to reduce the PL volatility in between hedging and the moment of cash flow for forecasted transactions. (especially true for listed companies).Taking an economic perspective, there is no benefit in hedge accounting at such a significant cost in terms of audits and administration . Hence, determine how high the cliff is, before you dive down into hedge accounting procedures.

Conclusion

In a perfect world with only blue skies and where work consists of having margaritas on the beach, there are no accounting requirements (and probably also no FX to manage). In our world, the same feeling can be obtained by making sure that the accounting for FX reflects economic reality as much as possible. Thisby applying the accounting standards as a framework. Furthermore  take into account what level of known discrepancies between the economic and accounting reality you are comfortable with.

*Please note hedge accounting and accounting for FX are not the same. By accounting for FX I mean the accounting entries done by non-local or group currency items. These can be invoices in different currencies or intercompany bookings. Hedge accounting is only linked to deferring derivative MTM on the balance sheet as opposed to PL immediately.

I am curious about your thoughts. Please comment…

 

Niki van Zanten

FX specialist

 

Overwhelmed by FX Administration? Your Provider Can Help With That

02-07-2020 | treasuryXL | XE |

Foreign exchange isn’t always about the big trades. For many organizations that deal with international currencies, they find that their FX needs start small. It may not seem like it, but your routine, day-to-day operations could be a larger FX risk exposure than you think.

Whether your ordinary operations are taking up time and resources that could—and should—be devoted to other matters or your current processes aren’t as efficient as they could be, one important step to managing your organization’s FX risk is taking a look at how your organization is handling transactions.

If you feel that you’re having trouble handling your transaction volume or you’re not handling your international payments as well as you could be, don’t worry: this is where your FX provider can help you out.

What can go wrong with day-to-day transactions?

Depending on how many your business makes each day, these typical, everyday operations could be taking up a large portion of your business’s time and resources. This time and resources could be more valuably spent elsewhere. Assess your operations and think carefully—are there any areas of your business that you think you’re neglecting because of how much time you need to devote to minute transactions? Are you missing out on the bigger picture because you’re too focused on the small things? When you assess your foreign exchange risk exposures, remember to consider everyday operations as well as the larger scope.

In addition, elaborate, inconvenient processes could end up causing trouble for your business. If, for example, you rely on employees to take care of manual data entry or transactions, there’s always the chance that human error could cause some unnecessary delays, or worse.

This is a common problem for fast-growing SMEs. Founders and owners want to monitor international payments and ensure that everything is being taken care of according to their standards, but they don’t have the time to monitor and physically process everything the way they’d like to.

Who should you turn to in order to ensure that your payments are being taken care of in a way that is efficient but still effective and up to your standards? This is where your FX provider comes in.

How can your foreign exchange provider help?

As we’ve said before, your foreign exchange provider does much more than help you find the best exchange rates. FX providers offer a wide range of products and services to assist their clients with their overseas payments, and one of these services is processing (or even automating) payments.

For example, your provider may be able to create a system that grants some users administrator rights to do the processing work while reserving payment authority for specific individuals. They can also offer secure, reliable, and straightforward processing, and they should be able to help you trace delayed payments. Depending on the volume and nature of your payments, they may also be able to help you automate them, or at least vastly cut down on the amount of time and resources it takes to make a transaction.

Finding the right solutions can take time, and it starts with the right FX provider. If your current provider doesn’t offer these solutions, or you haven’t found theirs to be as effective as you’d like, it’s important to shop around until you can find the provider that can help you to manage the administrative side of your transactions while maintaining the right level of quality and security.

At XE, they provide a broad range of currency services and products to businesses around the world. XE experts will work with you to ensure that your foreign exchange procedures are the right ones for your business and its needs.

 

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

 

 

 

How Can Your Business Address FX Risk?

25-06-2020 | treasuryXL | XE |

Last week, we encouraged businesses like yours to look beyond currency exchange rates when developing your foreign exchange risk management procedures. This week, we want to take that discussion a little further: what else is out there for businesses looking to improve their FX risk management? One common misconception is assuming that FX risk management is more narrow than it is. That is to say, many businesses might think that any FX strategy beyond purchasing the required currencies at the current spot rates would be currency market speculation. The truth is, there is a wide range of foreign exchange tools for businesses to reduce their risk exposures and improve their operations.

What about hedging?

Of all of the FX strategies and tools, hedging may be the most widely misunderstood. It’s a common misconception that currency hedging serves to second-guess how foreign exchange markets could potentially move in the coming days and weeks, but that’s not its. In FX risk management, hedging is a valuable tool to help insure the business against possible unfavorable movements caused by market volatility. It’s one aspect of a comprehensive FX risk management plan, not the entire strategy.

Like any other strategy, the importance of hedging for your business depends on your business and its exposures. Depending on your FX risk exposures, your organization may not need to make hedging a central part of its risk management plans. Your FX risk management strategies shouldn’t be based on a generalized idea of currency risk; they need to fit your organization’s unique risk profile.

What other products are available?

In short, this will depend on the FX provider. When researching FX providers, don’t just ask them about the rates they offer or what kind of advice they can provide on hedging strategies. Take some time to read up on the full suite of products and services they offer, and consider whether they would be valuable for your business both in the day-to-day and in the long-term.

At Xe, a number of products and services are offered to businesses to aid in their international payments as well as their FX risk, available as a standalone or API. Some of our products include:

Don’t go too far—in the coming weeks, we’ll be taking a closer look at our business offerings and the benefits they could bring to your operation.

Source

 

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page