Broker beats bank on currency exchange
An
Industrial Gas Springs product story
Edited by the Engineeringtalk editorial team
Mar 7, 2006
Gas spring manufacturer avoids potential currency exchange losses of up to £100,000 by transferring its dealings from a commercial bank to a money broker.
Gas spring manufacturer Industrial Gas Springs (IGS) has avoided potential currency exchange losses of up to £100,000 by transferring its dealings from a commercial bank to money broker Moneycorp.
The Mitcham-based company raises more than 50% of its £3 million turnover through exports, with the majority coming from sales to the USA.
As a result, money market fluctuations can have a major impact on the company's financial performance.
"Two years ago, for example, the value of the dollar rose sharply against sterling, which meant that the amount of money we received for our products in North America dropped significantly", said IGS's Finance Director, Andrew Atkins.
"To hedge against this, we negotiated a guaranteed selling option with our bank".
"However, this came at a significant price".
"Indeed, it would not be unusual for a charge of £20,000 to be made to buy the option".
Rates like this prompted IGS to look around for a more pro-active and cost-effective exchange service.
A detailed evaluation of the market followed, which led the company to transfer its dollar dealings last year to currency group Moneycorp.
"Through Moneycorp's stop loss and limit arrangement, we are able to secure much more attractive returns than we would using daily currency exchange rates", said Atkins.
"What's more, we are no longer hit by any significant up-front payments and now receive fortnightly calls from Moneycorp to discuss market movements and favourable times to trade".
"In addition, we often receive payments up to a day earlier than we did before through our bank, owing to Moneycorp's efficiency in exchanging incoming dollars".
During the past 12 months, IGS has saved many thousands of pounds on its currency transactions.
"There are many other small to medium sized UK enterprises that would also benefit from reducing their exposure to currency fluctuations", Atkins said.
"That's why I believe that all companies with significant export sales should check out the market to see what is available".
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