How businesses can avoid double currency conversion and reduce operating costs

5 minutes
Business tipsFinance
How businesses can avoid double currency conversion and reduce operating costs
In this article

Think your business doesn’t have to worry about foreign exchange risk? It may be time to think again. 

Nowadays, foreign exchange risk isn’t just an issue faced by big multinational companies. Dealing with the headwinds and tailwinds of foreign exchange rate fluctuations is just a part of doing international business, with currency values constantly shifting against each other. In fact, any company that has international suppliers or customers located outside their home country is subject to foreign exchange fees and currency fluctuations. 

In addition to this, double currency conversions (having to convert currencies twice to your home currency and the currency of your providers) can lead to your business losing portions of your well-earned cash every time you make a transaction. 

Fortunately, there are steps your business can take to avoid unnecessary currency conversions in your business, reducing your operating costs and lessening your business’s exposure to income uncertainty. 

Sound like a smart move for your business’s global scale-up? Let’s dive in.

What is double conversion?

We think this is best spelled out with a scenario. 

Let’s say that you’re a business owner that’s based in the US, however you have customers and suppliers in Europe. Without a Global Business Account, you’ll have to constantly pay foreign exchange fees when collecting money from your European customers, and then again when paying your European suppliers. 

This is what we call double conversion. 

Having to first convert your foreign currency revenue to your local currency, and then your home currency back to other foreign currencies to pay suppliers, is not only time-consuming - it can leave significant dents in your profits and your bottom line.

When your business’s financial processes involve you converting currency multiple times, you’re exposing yourself to currency exchange rate fluctuations unnecessarily. To save money, it really pays (literally) to use the right financial instruments that prevent the need for double conversion and reduce your overall operating costs. 

How to prevent double conversion

Utilize an Airwallex Global Account

Opening an Airwallex Global Account gives your business the opportunity to seamlessly trade in, convert, collect, hold and pay in multiple foreign currencies from around the globe, including USD, EUR, AUD, HKD, GBP and more. 

How does an Airwallex Global Account work?

With an Airwallex Global Account, you can open domestic and foreign currency accounts in minutes - all without even needing to visit a bank branch (or even leave your desk). 

Then you can collect foreign currencies from your customers and hold them in your account, without being exposed to multiple unnecessary conversions. 

Once you’ve collected a foreign currency in your Global Business Account, you have two paths to choose from:

  1. You can convert the money into your home currency. We offer a conversion rate between 0.4-1% above the interbank rate, which is significantly cheaper than other payment gateways and regular banks. 

  2. You can hold the money in your Airwallex Global Account without converting it, and use it to pay your suppliers or for other international expenses in the future - all without paying transaction fees.

Image of Airwallex business accounts

Coconut Bowls boosted their profit margins by 3%

Coconut Bowls, a high growth eco-friendly brand based in Australia, utilised their Airwallex Global Account to improve their margins and streamline their global financial processes.

Before Airwallex, Coconut Bowls was forced to convert foreign currency to AUD within 72 hours using their previous FX provider. They would then have to frequently convert these funds back into USD to pay their overseas suppliers and contractors. 

When they discovered Airwallex, Coconut Bowls were able to quickly shift to managing their international finances in a way that meant they weren’t losing a portion of their funds each time they conducted a global transaction. 

By using the Airwallex Global Account, they were able to boost their profit margins by 3%, eliminating unnecessary foreign exchange fees while also being able to collect, hold and pay with multiple major currencies like USD, GBP, EUR and AUD.

Paying suppliers and vendors

With an Airwallex Global Account, paying international suppliers and vendors is a breeze. You can collect funds from different countries, hold them in your Global Account, and then pay your suppliers directly from the platform in their local currency, making it simple for all. 

Avoiding double conversion in this way can add hundreds of thousands back into your business’s bottom line, so you can dedicate your resources to realizing your organization’s vision. 

Collecting money from customers and holding funds

The Airwallex Global Account’s seamless integration with international online marketplaces like eBay, Shopify and PayPal make it easy for you to accept payments from your customers in their local currency. 

You can also hold funds in your Airwallex Global Account, meaning you can skip the queues, excessive paperwork and even international travel trips that are sometimes required to set up bank accounts in countries outside the US. 

Paying employees overseas

Having an Airwallex Global Account as part of your business’s financial infrastructure means you don’t have to pay unnecessary currency exchange fees when paying your overseas employees’ salaries. You can send your employees their funds fast and in-full, with the full payment amount guaranteed on delivery when using the Airwallex local payment method (as opposed to the more traditional SWIFT network). 

With hybrid and remote working now the ‘new normal’, you can empower your business to scale-up globally by hiring (and paying) the people you really want on your team, no matter where they’re located. And in a way that doesn’t regularly hurt your bottom line.

Airwallex Borderless Cards minimize foreign exchange fees while traveling

With Airwallex Borderless Cards, you can reduce your operating costs by minimizing foreign exchange fees when your team members travel internationally for business. 

Our virtual and physical multi-currency Visa cards take seconds to set up, and give your team the power to make seamless and low-fee transactions on your business’s behalf in over 170 currencies - no matter where they are in the world. 

You’ll also be able to easily stay in control of team budgets, with real-time monthly or total spend limits, all tracked in a single, easy-to-use online platform.

No foreign transaction fees

Our Airwallex Borderless Cards take away the hassle of managing complex international balance sheets, with 0% international card transaction fees. 

No more surprise foreign transaction fees on items like software subscriptions or marketing. You’ll be able to save time and realise immediate cost savings, so your team can stop worrying about the nitty-gritty and focus on using their skills to grow your business, instead.

For example, Coconut Bowl (the fast-growing business we mentioned earlier) were paying sizable fees on their Shopify and Klaviyo subscriptions, alongside the 3% international card transaction fees they were paying on these regular auto-payments. By paying with Airwallex’s Borderless Cards from their Airwallex Global Account’s multi-currency balance, they were able to add those foreign currency fees back to their bottom line and have an immediate win for their cash flow. 

Only pay 0.4 - 1% above the interbank rate on FX fees

Why expose your business to unnecessary and expensive currency fluctuations, when it’s so simple to reduce your operating costs and improve your cash flow? With Airwallex Borderless Cards, you’ll only ever pay our market-leading rate of just 0.4 - 1% above the interbank rate on foreign exchange fees, saving you money when making regular payments to your providers and employees.

Make payments directly with your multi-currency balance

With an Airwallex Borderless Card, your team can easily pay for international expenses in over 170 different currencies. The multi-currency balance of your Airwallex Global Account will make it easy to navigate the finances of international travel, as you save money both abroad (with low foreign exchange fees and no monthly fees) and at home in the US (with 1% cashback on your domestic card spend). 

For example, if one of your team members travelled from the US to Hong Kong for business, they could use the HKD within the Airwallex Global Account (their ‘HK wallet’) attached to their personal Airwallex Borderless Card to pay for items during the trip. 

Added bonus: Reconcile expenses directly in the Airwallex platform

Airwallex offers end-to-end expense management for every business, no matter what growth stage your business is in.

You can easily upload receipts for approval, reconcile expenses from international trips, and gain real-time visibility over how the team have been spending on their Airwallex Borderless Cards

This gives your accounting team more power to control spending before it happens by encouraging responsible business spending, as well managing seamless approval workflows and improving oversight with enforceable expense limits. 

How does preventing double conversion improve your bottom line?

Preventing double conversion brings a host of benefits for US businesses, including improving your organisation’s bottom line by saving you money (and time). 

Save a minimum of 2-3% on FX by stopping double conversion

Stopping double conversion will save you a minimum of 2-3% more money compared to the standard double currency conversion rates for US dollars. You’ll always have access to our best rates with an Airwallex Global Account, no matter how big or small the transaction is. 

Streamline operations to keep headcount and overhead low

Offering end-to-end expense management, Airwallex takes away the need for large and clunky accounting teams, giving you the power to make decisions that lower your overheads and boost your bottom line. No more complicated expense reconciling and receipt collecting - just the right digital financial instrument for your business that gives you easy, real-time visibility over where your money is going. 

Improve customer experience by collecting in local currencies

Allowing customers to pay for your products in their local currency reduces friction at your checkout, raises your sales and fuels your business’s global growth. Whether you’re a small business who’s just expanded into selling overseas, or you’re the owner of a larger and more mature company - improving the experience for your global customers should be top of mind to ensure future success. 

What about currency fluctuations?

What is foreign currency risk?

The exchange rates between the currencies of different countries are never fixed. They are freely traded on the global financial market, and can fluctuate for all sorts of reasons. Employment rates, inflation, trade deals and government changes can all impact the foreign exchange rate between two currencies, and this shifts daily. 

With this in mind, foreign currency risk is the financial risk that results from fluctuations in  the value of a home currency against a foreign currency. For example, if you’re a US-based business who buys raw materials from Japan, a foreign currency risk could be if the value of the US dollar crashed against the Japanese Yen, making it very expensive for your business to purchase the materials required to manufacture your products. 

What’s the impact?

To some degree, all businesses are at the mercy of the currency market, and must take proactive steps to safeguard themselves from currency volatility risk. The impact of currency fluctuations can be widespread for businesses, usually depending on the business supply chain, specific volatilities and other liabilities.

Transaction risk

Currency fluctuations can present a risk to individual contracts and obligations your business might have. This could include being in jeopardy of not being able to pay foreign suppliers due to shifting foreign currency exchange rates and the subsequent squeeze on your profit margins. 

Translation risk

Your balance sheet can suffer losses from currency fluctuations when your company denominates some of its assets, income or liabilities as foreign currency (which you might do if you have foreign subsidiaries). The true value of your assets hasn’t changed, but the value of your balance sheet can go up and down, potentially causing medium or long-term risk to your business. 

Economic risk

Exchange rate changes can also reduce the competitiveness of US-based companies in the long run, regardless of whether or not they sell overseas. For example, if you manufacture all your products in the US, you’ll still be in direct competition with other companies utilising overseas imports, which may be cheaper due to currency fluctuations. 

How to mitigate risks

With the right processes in place, you can reduce your exposure to foreign currency exchange rate fluctuations, and protect your business through times of global market uncertainty. There are four more traditional ways you might do this:

  1. Pass on the risk to your suppliers and customers by only operating in US dollars (or whatever your native currency is), meaning the burden of conversion lies with them. 

  2. Use forward exchange deals to hedge against currency fluctuations. This is similar to insurance, where a related currency investment is set up and designed to offset changes in currency values, evening out the risk for businesses. 

  3. Open a foreign currency bank account with a regular US bank and then ‘match’ your sales receipts from one foreign customer paying you funds, to a foreign supplier that you owe funds in the same currency. 

Unfortunately, all of these strategies have cons. Unless you’re a large business with global leverage and a strong track record of success, the organisations you work with and customers who buy from you may refuse to take on the risk of conversion themselves. Your suppliers may refuse to invoice in US dollars, and you customers may just go elsewhere. 

In terms of the ‘matching’ strategy, this has more potential, however would require a lot of tedious bookkeeping and complex accounting to keep track of matching all your business’s international transactions. 

Avoiding double currency conversion and reducing operating costs with Airwallex

The ideal way to mitigate double currency conversion risk (and reduce your operating costs) is to operate with an Airwallex Global Account. This account allows you to open foreign currency accounts that give you a legitimate international financial presence, without needing to set up a physical entity in the country. 

With an Airwallex Global Account, you can seamlessly manage your money’s global movements, including taking payments from customers, paying suppliers and holding money in multiple currencies, and exchanging currencies with transparent, competitive pricing.

As well as the business process benefits, an Airwallex Global Account will also improve your bottom line by mitigating your business’s exposure to foreign currency risks. No double conversions and no unnecessary transaction fees. 

The best part? You can set up your Airwallex Global Account online for free. If you have questions, get in touch with the Airwallex team for a free demonstration of our financial infrastructure that can revolutionize the way you do business throughout the US and beyond. 

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