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How to set up a forward contract and lock in a rate for your business
03-06-2020 | treasuryXL | XE |
A forward contract gives you and your business certainty, allowing you the peace of mind to have confidence that your international exposures are taken care of.
At Xe, we work with businesses of all sizes across many industries. We recognize that each business has its own requirements for its payments, and thus we offer a diverse suite of money transfer products and solutions in order to meet each business’s international payment needs. Let’s say that you’ll need to make a payment in the future. Right now, the rates are in your favor, but your payment is weeks or even months away, and you’re worried that the rates could change in the coming weeks, which would make your upcoming payment much more expensive than it would be now. You can’t influence the markets, but is there anything you can do to avoid feeling the brunt of currency market volatility?
In that case, the forward contract would be the right solution for you. Let’s take a closer look at what that is and how it could help your business.
What is a forward contract?
A forward contract is an agreement to buy or sell an asset at a specified price on a specified future date. In the context of money transfer, this is how it works:
You specify which currencies you’d like to exchange, and get a quote at the current exchange rate.
You select the date on which you’d like to send this transfer, and provide all necessary recipient and payment information.
On that date, the transfer will automatically trigger, and will convert and send at the previously established rate.
You could think of it as the “buy now, send later” money transfer option. You’ll do the work of setting up the transfer now, and your currency exchange will happen at the current exchange rate, but the transfer itself won’t happen until the date you’ve specified.
Why is a forward contract useful?
A forward contract can be useful in two ways: allowing you to lock in your rate to avoid future volatility, and to ensure that your payment will be sent (and delivered) by a certain date.
Changes in currency values can dramatically impact the cost of your business money transfers. If the currency that you’re sending weakens, or the currency you’re transferring to strengthens, a simple payment could suddenly become much more costly for your business. A forward contract gives you and your business certainty, allowing you the peace of mind to have confidence that your international exposures are taken care of.
Additionally, if your payment needs to be delivered by a certain date, arranging your payment in advance can ensure that it will be sent on time. No matter how busy things get leading up to the transfer date, you can rest assured that your payment is taken care of.
How to set up a forward contract
If you’re interested in setting up a forward contract and securing a rate for your business’s upcoming money transfer, give us a call to set that up with our team. If you don’t already have an Xe account, take a look at our guide to registering for a business account.
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
Payment Fraud | A 750 000 euro Financial Scam that could happen even to you
| 02-06-2021 | treasuryXL | Nomentia |
Have you read the recent news on how Bol.com deposited almost 750 000 euros into a fraudulent bank account over a year ago? Simply, they thought they were making a payment to Brabantia, a household goods manufacturer. If you are not familiar with the story, here is it in a nutshell:
At the same time, Brabantia did not receive the payment, so obviously, they took a lawsuit to the court. And that was the point when the court discovered that Bol fell for a financial scam.
It all started with a legit-looking email like usually
In November 2019, Bol received an email in poorly written Dutch. Nevertheless, the email looked legit like it has been sent from Brabantia including the company’s logo. They were asking Bol.com to transfer the outstanding payment to an account in Spain.
The Bol employees fell for the trick. No surprises there, as these emails can be very well-crafted and if you have never seen one before, you could become a victim too.
The court thought the scam email was obvious and easy to recognize
Bol tried to get out of paying Brabantia claiming that the company’s employee fell for a business email compromise, and they were accused that they did not use two-factor authentication in the Microsoft 0365 environment. The story doesn’t tell if the email was really sent from Barbantia using a stolen username and password but hopefully, it still makes you want to protect your accounts with multi-factor authentication (MFA).
Despite this, the court ruled in the favor of Brabantia and ordered Bol to pay the outstanding payment. The reasons for it were the following:
How to avoid something like this happening to you?
There are a few tips that you should always remember.
When you care about security, you also show a good example to the rest of the team.
Trust your instinct and the learnings of this story and the security training
Always rather take longer to process the payment than pay a scammer! Creating good and strict payment processes and workflows can help with this. Also, trust your own and co-workers’ instinct if you feel like something is off.
Stay curious about financial scam news to know what the latest trends are and how hackers will try to trick you. Work closely with your security department! It’s in everyone’s best interest to avoid falling victim to a scam.
It’s not a question of whether you will receive financial scams and phishing emails, but when you will get them. Be prepared that you will be targeted and face the situation with confidence to avoid making a payment.
About Nomentia
Nomentia is a Nordic powerhouse for global cash management. We believe in a world in which businesses can make the right decisions no matter how unpredictable the times are. Our SaaS-based platform offers solutions for cash forecasting and visibility, global payments with bank connectivity, reconciliation, in-house banking, guarantees, and FX dealing. We serve 2,300+ clients in over 100 countries processing more than 200 billion euros annually. Cash is king!
Barbara Babati
Barbara is working in the marketing department at Nomentia. Previously, she worked in cybersecurity and data integration industries.
Why CFOs Should Foster Stronger Relationships with Banks
01-06-2021 | treasuryXL | Kyriba |
CFOs are the custodians of financial growth for enterprise business, and a key part of that role is to build and foster mutually beneficial relationships with banks and funding partners. Since banking relationships are built upon the provision of services; whether those are lines of credit, daylight overdrafts, bank account reporting, payments, foreign exchange or concentration / pooling structures, CFOs can and should maximise the value derived from partner financial institutions.
One of the first mistakes a CFO or finance professional can make is in selecting or expanding a relationship with a bank ill-equipped to handle the global nature of their business and geographic footprint.
For example, banking relationships have implications across borders as many strong financial institutions are partnered with local banks or their own local branches providing much needed local expertise. Navigating difficult tax and reporting requirements, local format and regulatory requirements or unique depository scenarios all call upon strong relationships with banks familiar with your localisation needs.
Automating your banking interactions and reporting with technology is an area of concern.
In this scenario, CFOs are not able to take advantage of the full range of banking services since lapses and gaps in technology solutions do not provide for straight-through processing of payments or the automatic posting of cash and transactional details from bank-provided daily bank statements. Banks have evolved their services to provide much more flexibility and sophistication with regards to intraday bank statements, high levels of detail within bank statements and the frequency of sharing this information up to 4 to 5 times per day. Without the right technology solution to handle cash and liquidity forecasting, CFOs are leaving value on the “proverbial table” in the form of lost opportunities to invest, grow the business, or mitigate risk. Meanwhile, the lack of finance and treasury tools and automation associated with technology solutions, keeps staff tied to daily, tactical tasks versus a focus on strategic support and projects.
How well do CFOs understand the full potential of their banking relationships?
CFOs must be involved in understanding the health of the banking relationship and managing, or at least receiving updates on banking scorecards and other metrics to ensure the bank relationship is being leveraged to its full potential. For instance, more than ever, banks often provide or are partners in enabling Supply Chain Financing or Discounting scenarios to help both sides of the financial supply chain achieve their objectives. CFOs, again, must leverage their banking relationships while coupling them to technology options such as a solution with Dynamic Discounting or Supply Chain Finance to maximise bank services.
Additionally, visibility to liquidity in near or real-time is a must-have for CFOs.
Liquidity planning is critical for CFOs in good times and in bad. Historical market drops have highlighted the importance of having real-time access to information about your total liquidity position, understanding what level of cash is flowing through all systems, and what level of liquidity can be allocated to invest in growth opportunities or simply pay employees. CFOs in many cases can partner with banks to develop a mutually beneficial relationship. At the end of the day, Treasurers provide the CFO with the assurance that assets are safeguarded and the organisation has the liquidity required to meet obligations and fund strategic decisions. This is only possible if they too have immediate visibility into their positions.
Finally, there is risk in having all of your eggs in one basket.
CFOs should have a backup plan – having your liquidity, services and debt instruments with one bank can prove to be risky. When financial crises strike from internal or external factors (like margin calls, bankruptcies, etc.), these financial risks are mitigated when the CFO has a back-stop and other banking partner options to keep the lights on and the supply chain flowing. Having major and minor banking relationships can help keep banks competitively working for you while giving your organization financial and liquidity options to keep operations moving.