Save Time, Increase Profits: Take Control of Your Foreign Affairs
- By Renee Roberts
We might be buying from sellers who have no interest in US dollars, but want to be paid in pounds or euros.
By Renee Magriel Roberts
The Internet has not only pushed bookselling into automation, but also into hypertension-producing foreign markets. It's great having access to all those bookstores in Edinburgh, or the customers from Japan, but every single methodology commonly available to complete foreign transactions appears designed to create headaches and cost us money.
Where booksellers might have once just sold books locally, now we get orders emanating from all sorts of unusual locations -- I once received one that read "Joe Smith, Mauritius, Indian Ocean". We might be buying from sellers who have no interest in US dollars, but want to be paid in L (pounds sterling) or C (euros). If that weren't enough to create anxiety, vendors are anxious to have either checks in their home currencies, or worse still, wire transfers directly into their bank accounts.
In addition to direct sales, we frequently buy books from overseas vendors, or engage in third-party transactions, where we buy from another seller to meet the needs of one of our customers. When either customer or vendor is located overseas, the timing of these transactions can be a killer. How can you be assured that by the time you receive a check from your customer, the exchange rate offered by your bank in a wire transfer will enable you to make any kind of profit? With really thin margins on third-party transactions, you can lose money if the money market goes against you.
One can always choose to only buy and sell domestically. I can understand this decision, especially when shipping and insuring incoming and outgoing offshore transactions can significantly shave off any profits. You could just roll up the moat and make do with US sales, but that is not a formula for success in a global economy.
When the dollar dips against the pound, for example, we notice a definite upswing in our foreign sales, and conversely, when the dollar rises, it is a better time to buy stock from overseas. If you are going to engage successfully in international trade, you have to be aware of the relative values of different currencies in order to maximize your profits.
If you just use third party sites to handle sales transactions, understand that you are being charged many times for the service they provide: built into the commissions and fees you are paying are hidden fees, such as the use of your money over time and the shaving of profits off the transaction via the exchange rate. To ignore the cost of the currency exchange is to tacitly agree to a continuous tax.
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Save Time, Increase Profits: Take Control of Your Foreign Affairs
- By Renee Roberts
Big banks provide competitively priced services only to their biggest customers.
Making foreign purchases is not much better. If you choose to pay with a credit card, you may not necessarily get the best price from the vendor (because they are getting discounted funds) and you are getting dinged with the same invisible charge: unfavorable exchange rates. This is also true if you use a service like paypal, which not only discounts funds to the seller, but gives the buyer poor value on the exchange. The seller also pays for the float (the delay in crediting funds to your account).
Using a bank to initiate a wire transfer is also problematic. We work with Bank of America here on Cape Cod. When they gobbled up our local Fleet in a survival-of-the-fittest move (who in turn had taken over Bank Boston, who absorbed Shawmut Bank) I thought that finally we were dealing with an institution savvy in international banking. They claim they "serve the financial needs of 98% of the U.S. Fortune 500" and 20% "of the midsized companies across the U.S. and in more than 20 countries...a universal banking leader" so I thought we had an organization that could efficiently, economically, and accurately help us with foreign transactions.
Not so. One would assume that costs are the same across the board with a wire transfer service, but this is not the case. Banks provide competitively-priced services only to its biggest customers. Despite being "a universal banking leader" few employees are trained at filling out the forms required to initiate a wire transfer. Smaller banks or banks in rural areas in the USA, unused to dealing with foreign transactions, may know little or nothing about the process, so you pay for their lack of knowledge not only with your money, but also with your time. I have it, on excellent authority, that some banks even charge usurious commissions (a percentage of the amount to be wired), if they think they can get away with it.
What I found in my own local branch on Cape Cod was a foreign funds delivery process that was at best inconvenient, and one that required manual data entry more than once (and so was prone to --and in fact produced -- errors). A foreign wire transfer was expensive not only in time, but in money. It included incoming and outgoing fees and a take-it-or-leave-it exchange rate. After driving six miles to the bank and waiting over an hour, do you leave the form on the table, drive home, and wait in line again for a bank officer if you don't like what they are charging you?
Receiving funds from our British bank was also problematic. It once took me a month to transfer pounds sterling from London into our dollar account here in Massachusetts. When everyone at both ends of the "wire" claimed they did not know what was going on, in disgust, I faxed both branch managers, told them that I didn't understand why a simple transaction between two accounts belonging to the same person could not be completed quickly, especially when it was between two of the world's largest financial institutions.
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Save Time, Increase Profits: Take Control of Your Foreign Affairs
- By Renee Roberts
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Turns out the British had cleverly outsourced to a service in India who had entered every single piece of data from the transfer into the wrong field on the transfer screen. The Americans, in a similar transfer, managed to leave off one of the numbers in the routing number, so the money bounced around in the system before being returned to my account for a do-over weeks later. Nobody, of course, pays for any lost business while your money is in the ether. But they never forget to charge incoming and outgoing fees and give you a poor exchange rate to boot.
Time delays present a further problem. A recent customer wanted to pay for an expensive set of books with a bank draft that would take her a couple of weeks to send to us. It proved to be near-impossible to get the Australian bookseller who had the books to agree on a price in US$. With narrow margins, both of us were worried that we would lose our shirts if the exchange went the wrong way by the time the funds were received from our customer and wired in Australian dollars to the vendor.
A few weeks ago, feeling like the entire process was out of our control, and that we were at the complete mercy of third-party websites, credit card companies, and expensive and sloppy financial institutions, we decided to learn more about the process of receiving and sending funds overseas.
In a sort of epiphany (I was, I admit, a Joycean scholar), I realized that the problem was not buying and selling books overseas, but the difficulty and cost of sending and receiving funds in different currencies. The institutions we were using to send and exchange currency were getting in our way and costing our company a lot of time and money. What we needed was more control over this hidden but critical process.
Once we identified the real problem, we found a better way to handle each transaction. We discovered a service that would instantly tell us the cost of sending or receiving money, enable us to receive the best exchange rates, and minimize or eliminate the extra charges that we've been paying. We could handle delayed but certain sales, because we could lock in exchange rates to guarantee our profits.
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Save Time, Increase Profits: Take Control of Your Foreign Affairs
- By Renee Roberts
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The key to empowerment in our foreign affairs was in making the acquaintance of XEtrade (www.xetrade.com), the on-line discount foreign exchange service of XE.com, a site we were already using to look up exchange rates. XEtrade is an alliance partner of Custom House Currency Exchange, North America's first true discount foreign exchange brokerage -- with over ten billion dollars in annual transactions. As a transaction aggregator they are able to give us the service, the focus, and the competitive rates that only the largest companies enjoy with their banks.
Next month I'll report on an interview with Steven Dengler, CEO of XEtrade. We'll demystify some of the language used in currency exchanges and look at how to initiate purchases in foreign countries using this service. At the same time we will compare the costs (dollar and otherwise) of using XEtrade with the more common ways of sending funds overseas.
Renee Magriel Roberts can be reached at renee@roses-books.com.
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