Planning can be problematic for online exporters in a world of uncertainty and change.
We’ve seen the recent fall in the value of sterling. That’s putting the squeeze on domestic sales margins and increasing the cost base.
The problem of course is predicting the future, and considering what steps we need to make to deal with currency fluctuations.
Matters are complicated by the fact that for some businesses the fall in sterling has been advantageous, while at the same time material costs may be rising.
Service industries, may find themselves enjoying a competitive advantage so long as they are not subcontracting expertise overseas.
For small exporters, dealing online and via e-commerce, this is particularly concerning. A recent survey on behalf of the British Chambers of Commerce shows that nearly half of businesses take no steps to manage the currency risk.
So, what steps should a small business consider?
- Invoicing in sterling, is one of the most common steps taken – if customers will accept it.
- Having a foreign currency bank account is also an option. Companies can then deal with sales and purchases in the same currency.
- Other options include hedging, and waiting for an advantageous spot rate.
- Some businesses are already turning to FX specialists to help manage risk.
The future looks volatile with protracted Brexit negotiations adding to the heady mix of currency uncertainty and inflationary pressures.
The one advantage that SME’s have is the ability to be nimble and fleet of foot. When dealing online, pricing policies can addressed quickly and easily. However, care must be taken not to confuse or unsettle customers with too many changes.
Constant reviewing of the situation and keeping all options on the table looks like being wise position. It's all too easy to see profitability eroded by repeated small percentage FX changes.
It's probably time to get more proactive in monitoring and managing risk.