Australia is often described as the lucky country – but historians have also called it a “tyranny of distance” – being so far away from major manufacturing hubs such as Asia, Europe, and the United States.
The fact of the matter is the supply chain is global – and doing business overseas is a necessity. However due to inflation and supply chain uncertainty, the costs of doing international business rose noticeably during the COVID-19 pandemic; and recent troubles in Eastern Europe have forced up the price of petrol which has also contributed to higher shipping costs.
So how can a business save money on doing business overseas? Here are some ways to reduce costs when dealing with overseas companies.
Saving on foreign currency exchange
Dealing with companies in foreign countries is now commonplace. That means foreign currency conversions are equally widespread – and can become expensive if Australian dollars weaken against other stronger currencies such as the US Dollar, British Pound, or even the Chinese Renminbi.
According to the Australian Competition and Consumer Commission, the World Bank has found that foreign exchange costs in Australia was the third most expensive G20 country to send money from.
For the occasional purchase, a business may use a credit card or a bank transfer to purchase goods in foreign currencies. These are secure and convenient ways of paying in foreign currencies but come with hidden – and cumulative – costs.
Credit card providers will charge as much as 3% of the value of the transaction in fees. These costs can mount pretty quickly. You are also at the mercy of variable exchange rates – the rate you see at the time of purchase may be different from the one used when the payment processor approves the transaction. Add to that credit card interest that can be as high as 22% p.a.!
Bank transfers may not attract interest, but they are slow as funds may take days to hit the target account, and expensive since you have to send more in local currency to match the foreign currency. It is important to learn how to send money overseas the right way to save more on each transfer.
Using a forex trading desk
A dedicated forex (foreign exchange) trading desk lowers costs by removing transaction fees, offering lower margins than banks or credit cards. In most cases, major forex desks may offer you dedicated business concierge services to manage your accounts and execute orders according to your needs. These cost saving measures may be forward contracts or stop loss orders.
For example, forward contracts are frequently used in logistics and shipping to mitigate risk. The forward contract is a legally binding agreement in which one party (a business) agrees to purchase or sell a specific quantity of one currency in return for a specific amount of another currency at a future date. This contract stands apart from the current market rate.
Some traders will enact stop loss orders, so you trade at a specific price floor or ceiling; or limit orders that only execute trades at your target sell/buy rate.
You may also be able to open multi-currency accounts so you can manage your finances from overseas invoices or international payments.
Some business forex traders may also submit IFTI (international funds transfer instruction) reports on your behalf, ensuring compliance, which reduces administration costs.
Using integrated communications
Using an integrated communications platform that a business can use to coordinate global teams and place orders is a streamlined and cost-effective way to save on phone calls and administration.
Using email and phone costs either time or money. Integrated communication that can connect with project management tools, CRM, and variety – video chat, text chat, or voice calls – keeps employee options open and cohesive. Integrated communications can also interface with VoIP and direct calls to employees working anywhere in the world, on a variety of devices which can also increase business efficiencies.
Integrated communications can also interact with your cloud computing apps – more on that later.
Using integrated communications can also reduce – or eliminate – the need for regular international travel, which has become a huge overhead as inflation bites and fuel costs rise.
Online transcription or translation
One of the biggest hurdles for companies doing business is the language barrier. Thanks to Artificial Intelligence, video calls can be transcribed into your local language and vice versa, often with as high as 95% accuracy. This can remove one of the biggest obstacles in communicating with suppliers or customers overseas.
Translation of documents is also made easier with a combination of AI and human interpreters, which can work on documents quicker than one interpreter on their own. Some services may also be able to certify documents for official use in other countries.
Using cloud computing
Cloud computing can enhance business operations and accessibility by your global workforce and increase efficiency throughout the business. Using business applications remotely or in the cloud means your teams can access files, business intelligence, collaborative tools, and analytics using relatively low-power devices such as laptops or mobile devices.
It also allows your business to be more agile on the global stage, meaning one time zone can clock on as other clocks off. Cloud applications such as Xero for accounting, Microsoft Teams for collaboration, or ZenDesk for customer service are already in high use in firms both big and small around the world to power their international business.
Better yet, most, if not all these cloud services are interoperable and scalable, so they can grow as your business grows.
All these methods combined can save your business significantly on doing international business, freeing up capital for growth and other ventures.
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