So much so, the shockwaves of Liberation Day are still being felt by the SME community. In February, business confidence fell to its lowest level ever recorded, and there’s little sign that this market uncertainty will fade as Trump continues to battle US courts to greenlight his tariff proposals. These last few months have shown that the operational status quo is no longer sustainable, and SMEs with international exposure must urgently rethink their models to protect their margins and offset cashflow pressures.

In this environment, every margin point counts, and what is lost on one side can be made up for on the other. In this respect, the currency markets have witnessed major swings. The euro, for instance, has gained nearly 10% against the dollar, and this is not the only currency pairing to change dramatically. This presents a golden opportunity for SMEs who can realise the financial benefits of paying close attention to FX when making international payments and securing the best possible rate at the best possible time.

Currency management is now a key vehicle for growth and must get the attention it deserves.

Protecting your margins

When margins are tight, SMEs need to identify all opportunities to preserve cashflow and generate new revenue streams. Yet many are unaware of how value can be taken from FX, especially when it’s folded into an existing service by their bank. Consider, for instance, that the Indian rupee experienced its worst single-day decline in over two years earlier this year, while the Taiwanese dollar had a record-breaking 8% gain in two days. Taken at face value, these two events may seem isolated and distinct, but for businesses that make or receive payments from suppliers – or customers – in these regions, these price movements could have a big impact on the bottom line.

Another way to look at this is to take the euro-dollar pairing and compare the exchange rate over a six month period. If a hypothetical SME, based in Europe, had a monthly standing order with a US supplier for $50,000 worth of goods, those items would be more expensive today than in January. If the SME had the option to lock in January’s 0.92/1 EUR-USD rate, it would be more than €1000 better off per month based on the fees it would pay through its international payments. This is of course a basic representation but it shows how quickly costs can scale as invoices rise – impacting growth, hiring, production expansion and innovation.

SMEs need to make it their mission to get the possible rate, just like consumers do when taking a trip abroad. In international travel, there is a wealth of information and guidance available so consumers can shop around and secure the best possible exchange rate. Seldom do we accept the first rate we are shown. SME leaders should settle for no less and ensure they have the right FX dynamic when making business payments. 

Lock in your currency exposure

SMEs need to reclaim ownership of their FX rates to have the peace-of-mind that their payments have protection against market volatility and risk, and that they can get the maximum value from their transactions.

Many don’t know where to start or what the process looks like, so here’s three tips to turn macro-economic uncertainty into an FX opportunity:

• Timing, currency, and rate – get all three right: SMEs need to shift their business strategy to gain direct access to FX markets and benefit from opening local currency accounts. They must consider options outside of the traditional banking route, which can often carry unexpected fees, and seek flexible, transparent alternatives. SMEs need a partner that can move quickly to drive access to difference currency pairings if they are more favourable
• Understand currency risk management tools: SMEs must immerse themselves in currency management tools that can protect their margins and support growth. There are a range of options available to them, based on their business need and demand, but all can lock in buy-sell rates for a future date. This allows them to benefit from favourable market conditions over a set time period
• Tailor the strategy: every SME is different and each business will have its own international payment requirements. It’s critical that they have a firm understanding of their payment volumes, liquidity positioning, risk-aversion and future market plans and priorities. This auditing forms the basis of the currency management process and maximises the chances of locking in the best rate based on business need

When there is an unprecedented level of economic uncertainty, driven by factors outside of their control, it’s critical that SMEs explore every opportunity to protect their margins and product competitiveness, and find alternative routes to growth. For those with international exposure who make regular global payments, paying close attention to currency management can make a big difference. It’s an option that does not require heavy resource or investment, and can drive significant savings and business efficiencies in the long-run. Historically, it’s a topic that has sat within the broader finance team, but given its importance to growth, it’s time that it becomes elevated to the purview of the senior leadership team.

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