The move towards globalisation and the emergence of the digital economy has transformed the environment for all sorts of companies in recent years. Whereas many businesses may once have had a highly localised approach and been content to operate in just one small area, it has now become viable for even the smallest firms to work internationally.
As a result, they are having to transfer money across the globe on a regular basis, but how can they make sure they are getting the best deal on exchange rates? There are many ways in which they can proceed, from arranging an online currency comparison or consulting directly with an expert. This can be vital in order to help them make the most of their money and avoid paying over the odds for routine currency transfers.
Large businesses in particular could benefit from researching the market thoroughly. While these firms may use many products offered by banks on a day-to-day basis, they might find their regular provider does not always offer the most favourable foreign exchange rates. Therefore, it can be a good idea for them to shop around and find out what other deals are being offered by different suppliers.
David Wright, managing director of Axia FX and the former global head of FX at RBS, is one advocate of this approach, as he believes large businesses often assume they should simply use their regular financial services provider for foreign exchange.
"Banks prey on that assumption and don't give them a particularly good service, because they almost see it as a captive business," he commented.
Small businesses may also struggle to get a highly competitive rate, but this problem could be difficult to resolve, simply because of their size. Indeed, Mr Wright noted that some foreign exchange specialists may put them relatively low in the "pecking order of importance" and therefore offer them fairly poor rates, as well as less expertise than they would give to bigger companies.
After all, a typical FTSE 500 business, for instance, will have lots of in-house know-how such as treasurers with plenty of knowledge of foreign exchange. Since smaller companies are not specialists in the market and lack a thorough understanding of various important issues, banks may be able to take advantage of this.
"I am positive that education is the most important thing for businesses, the more they know - the less likely they are to get ripped off," Mr Wright commented.
But fortunately, there are experts and organisations out there who can offer dedicated support to small businesses and help them find the best rates and hedge their foreign exchange exposure at the right times. Again, it depends on researching the market.
Nevertheless, banks and independent financial advisors can sometimes be governed by self-interest, recommending options that generate strong returns for them rather than their client. Therefore, the onus may be on the small business itself to take steps to see whether it is getting the benefits it expects from its supplier. Mr Wright has suggested companies try to work closely with them and make sure they ask the right questions in order to get a good service.
Small businesses can ill afford to pay more than they need to for transferring money around the world, particularly if they are doing so on a regular basis, so the need for them to keep their eye on the ball is very important.
Of course, the financial markets have been very volatile in the last few years and conditions across the globe do not look like calming down any time soon. As a result, businesses of all sizes need to work out what approach they plan to take to deal with currency fluctuations.
Mr Wright stated that hedging "everything at the beginning of the year" could be a good idea, as it offers greater stability over a 12-month period. However, he acknowledged that this could be counterproductive if the rate does go their way during the following months, as they will not get any benefit from it. The expert suggested that bigger businesses are more likely to hedge than their smaller counterparts, partly because of their greater experience at dealing with foreign exchange issues.
"Some companies do rely on foreign exchange swings to boost their profits, but then they get caught out if it goes against them - [but] large companies don't need that," he noted.
Small and medium-sized businesses may look at the some of the savings larger firms enjoy when getting the best rates and feel highly envious. After all, Mr Wright believes it would not be unusual for a business with an annual turnover of £100 million to save about £1 million "by being aware of foreign exchange rates".
However, the rate differential typically goes up depending on the size of a firm, so any savings they get are relative. Therefore, a business that has a turnover of £10 million should be pleased if they can save £100,000 a year by getting the best foreign exchange rates – as this is the same proportion as that enjoyed by a larger counterpart.
So while many of the same issues need to be considered across the board, businesses of all sizes have to think about what works best for them and not necessarily what is yielding results for another firm.