How SMEs can manage their FX

Ellis Taylor at currency-exchange platform Glyde shares his tips and insights to help company leaders manage foreign exchange costs more efficiently and avoid exploitation

 

If you’re a small company dealing with overseas suppliers, customers, or clients, securing the best exchange rates is crucial to maintaining a healthy cash flow.

 

FX costs on paying invoices and purchasing stock in multiple currencies can drain 1-2% of annual revenue for SMEs, the equivalent of £20,000 for a business with a turnover of just £1,000,000.

 

Build up your FX know-how

It is crucial for SMEs to build a basic understanding of how currency markets work. Keep a close eye on business news for signals of potential movements, and regularly check reliable sources such as xe.com, wise.com, or Glyde.money for up-to-date rates.

 

Treat your FX broker with caution

However much research you do into FX trading, securing the right rate at the right time to convert from sterling into another currency can still feel best left to a professional broker. But if you do work with one, don’t fall into the trap of trusting them implicitly.

 

Brokers are regulated by the Financial Conduct Authority (FCA), but the way many of them deal with SME clients can be questionable. They may misrepresent exchange rates, conceal hidden commissions, or even renege on long-term contracts. ‘No commission’ rarely means free; costs are usually buried in the rate itself. According to Glyde’s analysis of more than 3,400 legacy transactions, sourced from its free-to-use FX calculator, these practices allow brokers to skim an average of £992 from companies on every trade.”

 

Ask the right questions

Challenge brokers about their levels of commission and compare what other firms would charge. Many will claim you don’t have to pay a fee for their services, but then include undisclosed mark-ups of 1% or more. Insist on fixed-margin agreements that legally lock in a transparent FX margin.

 

Don’t be afraid to question your broker if you’re uncertain about a deal, or if anything you see or read about the markets doesn’t quite fit with what they’re telling you. You can also approach other brokers for advice – they’ll be the first to flag if a competitor is behaving badly.

 

Hedge your known costs, not your whole revenue

If you decide to handle your FX trading yourself, hedging is a good tactic. This involves locking in an exchange rate on trades for several months, usually with something called a forward contract, which is carried out through a bank or FX broker. Hedging protects your business from volatile currency movements. For example, shielding you from a sudden rise in the US dollar that could make American imports significantly more expensive.

 

But don’t lock all your future revenues to a fixed rate, as this can backfire if demand changes. A smarter approach is to hedge expenses you know you will definitely have, such as regular supplier invoices and loan repayments.

 

Automate don’t speculate

While it’s important to stay aware of how rates are moving, especially if you’re managing exchanges yourself, don’t waste hours watching every rise and fall or trying to “time the market” perfectly. Even professional traders struggle to beat it consistently, and short-term fluctuations are often close to random.

 

A smarter strategy is to set clear rules, such as executing a trade from GBP to EUR if the rate improves by 1%, and let automated exchange software carry them out. This removes emotion from the process and ensures you never miss opportunities through delays.

 

Don’t batch your payments

Many SMEs wait until month-end to settle multiple FX invoices in one lump sum. But doing so exposes them to a single exchange rate on a single day. Spreading payments and diversifying currency approaches can significantly reduce this exposure.

 

Smaller, automated payments tend to create a smoother average rate and reduce the risk of being caught out by sudden swings.

 

Keep foreign currency on account

It’s a very good idea to have bank accounts in the foreign currencies you frequently deal in to manage receipts and payments without the need for conversion. But, where possible, have a spread of different foreign currencies in reserve to spread risk.

 

Invoice in your home currency

If you are UK-based SME, ask international clients and suppliers to invoice you in sterling. That will shift the exchange risk onto them. They may not agree, but it’s worth trying.

 

Have clear FX internal processes

Set out policies for managing foreign-exchange trades, including thresholds for selling and hedging. Make sure all relevant staff are well-briefed on them.

 

Consider using an online currency platform

These allow SMEs to send, receive and convert currencies directly, without relying on banks or brokers. A strong platform offers transparent margins, live market rates, and automation tools that remove human error and delays. It gives leaders a single place to manage payments, monitor exposure, and make data-driven decisions. 

 

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Ellis Taylor is co-founder and CEO of borderless currency platform Glyde, which allows companies to trade in more than 50 currencies, with no middlemen or hidden fees

 

Main image courtesy of iStockPhoto.com and VM_Studio