The Currency Management Trends to Watch

FX management can be a tedious, time-consuming process. To see how companies are mastering this function, we polled over 100 senior finance leaders at mid-sized companies to learn their biggest FX pain points.

*Download the infographic “Buried Treasury: The Voyage for Currency” to learn more about the perils of FX management*

The Woes of FX Management

With the best intentions, businesses set up currency accounts to simplify payments when operating across different countries. When asked, “how many bank accounts does your company have that are not in USD?” a majority of respondents indicated that their standard number of accounts was 3-5, with others indicating 6-10 and even 10 plus.

With multiple global bank accounts, it’s no wonder that respondents are having FX challenges—for fast-growing and mid-sized businesses, these accounts, in addition to managing trade currency and facilitating bank relationships, fall solely on their time-pressed shoulders.

Which leads us to our most pressing question, what is the biggest challenge in managing foreign bank accounts?

It’s almost a tie—at 32% and 30%, the two biggest issues are bank account administration and bank relationship management and communication. Two obstacles that seemingly go hand-in-hand. Other complications that continue to tax our financial friends are rate exchanges, bank fees, reporting, control of funds, foreign language breakdowns, and banks not having local offices or branches.

So, in order to combat these FX challenges, businesses obviously have a strategy in place to streamline their processes? Not even close. A surprising percentage of respondents indicated that they have no management in place when it comes to FX. While others stated that they might use an independent treasury department or have someone on their team that manages AP internally, it’s the 28% of respondents that don’t have any processes in place that are cause for concern.

Hidden Costs of Currency

Your money is costing you money. As a finance professional, you know that costs add up and broken, clunky processes are the gateway to unnecessary spending.

When asked how much their company typically spends on currency conversion and operating cost each year, 52% of respondents indicated that they spent less than $10,000 while 12% spent between $10,001 to $20,000 and 7% spent closer to $40,000 a year.

What was most astounding was that even though 74% of respondents had inside knowledge of their current currency spend, 26% had no idea what their operational overhead looked like. A sobering reality for even the most seasoned finance teams.

Payments in 2019 & Beyond

Just like the majority of our respondents, you might be a part of an international company with multiple subsidiaries—3-5 being highly representative in our survey. And chances are you need to fund your local entities in order to make payments in local currency.

Additionally, you might also be dealing with a cost-plus allocation structure—some of your subsidiaries are not making a profit. And managing multiple banking relationships for these types of entities can add unnecessary complexity to a global financial operation.

3-5 is the FX breaking point—once your business is there, you need to have a strategy in place. Managing complications like bank account administration and management while potentially spending over $40k in currency costs is not going to cut it in our increasingly tech-forward world.

As businesses continue to build and grow internationally, the role of currency conversion and FX management is going to become even more meaningful to the bottom line. Make no mistake about it, the future state of finance is streamlining global payments.

Check out the below infographic “Buried Treasury: The Voyage for Currency” to learn more about the perils of FX management!