With operations disrupted and drastic changes in supply and demand, 2020 presented more than its share of challenges for manufacturers. Will 2021 be much different? OFX surveyed 690 US business owners at the end of September to gauge their confidence in overseas markets. Our data revealed that overall, business owners estimated that they lost out on $1.4 million annual revenue by not attempting to reach other international markets.1
In an increasingly connected global economy, manufacturers are connecting with their global trading partners more often than many other industrial sectors. It’s a vital part of their business. Here are 5 tips for continued success in 2021.
Build a network of suppliers and contacts
When it comes to cross-border trade, businesses told us that their networks were vital, with over two-thirds of manufacturers saying that trusted, international contacts and suppliers were the most important factor for successful cross-border trade. And a limited international network was a barrier to growth for some businesses, with half of manufacturers saying it was the biggest challenge they faced when starting to go international.
Whether you’re looking for new sourcing, or expanding to a new market, when travel restrictions ease, you’ll be due for a business trip. In the meantime, set up video calls with your suppliers. When it is safe to, you’ll want to visit the market and meet face-to-face with your suppliers. Consider hiring a guide or translator with connections in your industry, so you can see the competition up close. A consultant may also be able to help you find new distribution channels or networks to speed up your supply chain or assist you with understanding typical employee expectations if you’re tapping into the local workforce.
Evaluate what you will be charged for the exchange
Nearly 90% of manufacturer respondents have made a global money transfer to buy or sell goods. Notably, manufacturers are concerned about the fees attached to foreign exchange. The most successful businesses don’t simply rely on the exchange rate they find on the internet. If using a bank, the bank likely adds or embeds a margin into their exchange rate as a cost of doing business. And they may also charge a fee. Other providers may exchange at the inter-bank rate, also known as the mid-market rate, and charge a separate fee on top. When comparing rates, the most confident businesses check rates and look at the amount the recipient receives. Check rates here to see how it works at OFX.
Understand the influences on currency fluctuation
One in five manufacturers said that understanding foreign exchange markets and when to transfer money was the most important factor for cross-border trade. That makes it important to understand what influences exchange rates between different currencies. A country’s inflation rate, interest rate, monetary policy and even tourism impact the demand between two different currencies. At OFX, we monitor global events and FX markets day and night, so you don’t have to. Free rate alerts can inform your decision. When you think the time is right or when you need to, transferring money from your domestic bank account to a foreign bank account is easy with OFX. In just a few simple steps, you can set up a single or recurring international transfer via our website or mobile app, and every transfer is swift and secure.
Manage currency volatility
Over half the respondents to our survey scheduled their foreign exchange transfers. By using a mix of on-demand transactions and scheduled payments, the most successful manufacturers limited their exposure to currency volatility. These strategies usually involve contracts that allow companies to lock in an exchange rate for an extended period, often up to a year. OFX provides several risk management tools to help businesses limit their foreign exchange risk.
Speak directly to an expert about market volatility
When it comes to your costs and profits small businesses operating overseas are subject to the swings of currency exchange rates. A great exchange rate to pay your supplier today may not be available next month. Half of our survey respondents said that being able to speak to an expert about market volatility alleviated their concerns with currency exchange. As with all business, managing trade in today’s global marketplace can be complex. So, having a solid understanding of the business’ cashflow position and currency risk exposure is key. Speak to an OFXpert who can help you move money globally.
No two businesses are the same in terms of their goals or tolerance to risk. At OFX, our dedicated team of currency and product specialists are on hand to support your business in building a strategy tailored to your needs. Learn more here.
OFX US SMB Cross Border Confidence Survey. Conducted online between September 25 and September 31, 2020