Importers: How FX margins can affect your cash flow
David owns a Sydney-based company that imports kitchen and homewares. On average, he buys US$100,000 per month to pay various suppliers in China and South East Asia. Like many importers, David had not been worried about the exchange rates he’d been getting. The Australian dollar was strong and reasonably stable. His foreign exchange provider had always done the job effectively, and because his turnover was increasing, he had access to a foreign exchange specialist who could give him better rates.
As world financial markets became engulfed in turmoil, the Australian dollar collapsed. The comfortable profit margin he once enjoyed was slashed, and costing his new shipments became difficult because the currency was so volatile.
Spurred by the fluctuating dollar, David sought a service with more competitive rates and lower fees. He found online service provider XYLO Foreign Exchange, which he discovered he could use even though he was a customer of another financial institution. David compared XYLO’s rate with that of his existing provider; a rate 20 points better meant that on a US$100,000 payment, he would save over $400.
He further discovered that instead of the $20 fee he was currently paying for each transaction, XYLO’s fee was only $5 per telegraphic transfer, meaning further savings on each international payment. A quick calculation showed David could save about $5,000 over the year.
The online service also meant he could save time: in three steps, he could book the foreign exchange rate, set up his payment and complete the transaction on the spot, and the system would keep his transactions on file for easy reference.
Assistance from XYLO’s foreign exchange specialists also provided him with risk management strategies, with some ideas on how to protect his foreign exchange exposures.
—XYLO Foreign Exchange
XYLO Foreign Exchange is a division of Westpac Banking Corporation ABN 33 007 457 141 AFSL 233714. For further information, call 1300 995 639 or visit www.XYLO.com.au.
The above case study is for illustrative purposes only and should not be relied upon as an indicator of future results. You should obtain and consider XYLO’s Product Disclosure Statement available at www.XYLO.com.au before deciding whether or not this product is appropriate for you.