The overlooked cost hiding in your international payments
South African businesses are good at keeping costs in check.
Finance teams negotiate hard with suppliers, query bank charges, shop around on insurance and push back on price increases.
But there’s one cost that often slips through without the same attention: the rate you pay for foreign currency.
For businesses importing goods, equipment, raw materials or services, foreign exchange can be a sizeable annual expense. But unlike a supplier invoice, it doesn’t come with the cost spelled out.
You see the rate you’re quoted, but not always how far it is from the market rate. That gap is the real cost.
How small differences add up
Take a business that pays R1 million a month to overseas suppliers.
That’s R12 million in foreign currency a year.
If the rate it gets is just 0.5% off, that costs the business R60,000 a year. At 1%, it’s R120,000.
For bigger importers, the numbers climb fast.
So, as with any big supplier cost, it’s worth asking not only “What’s today’s exchange rate?” but also “How competitive is the rate I’m being offered?”
Why so few businesses compare rates
Part of the reason is history.
Foreign exchange has always been closely tied to a company’s banking relationship.
When a supplier needs paying, the business calls its bank, asks for a rate, books the deal and makes the payment.
It works, so nobody really questions it.
Finance teams often negotiate hard with an overseas supplier on price, then accept whatever exchange rate they’re given to pay that same supplier.
That doesn’t mean the rate is bad, just that the business probably doesn’t know.
All you need is something to compare against
You don’t have to be a currency trader to know whether you’re getting a fair rate.
Most people wouldn’t buy a car, take out insurance or invest a large sum without getting more than one quote, and foreign exchange is no different.
If you get quotes for the same transaction at roughly the same time, you can see straight away whether there’s a meaningful gap.
A hidden cost becomes one you can measure, and then manage.
How technology is levelling the playing field
Sharp FX pricing used to be mostly for large corporates with big trading volumes, treasury teams and dealer relationships.
Digital platforms are changing that, letting smaller businesses get live rates, trade and pay online, and handle paperwork digitally.
TreasuryONE’s SME Forex platform, for example, gives clients an instant live quote instead of making them wait for a dealer to come back with a rate.
The deal then runs through a secure digital process to settlement.
The real shift isn’t the technology, it’s the transparency.
Being able to compare a live rate gives businesses information many didn’t have before.
Pricing and risk are two different things
Getting a good rate today isn’t the same as managing your currency risk.
An importer that has to pay a US dollar supplier in three months’ time still runs the risk that the rand weakens before then.
Deciding when to hedge, how much to hedge and which instruments to use is a separate treasury decision.
Either way, pricing matters, whether it’s a spot payment today or a longer-term hedge.
Good FX management starts with knowing what currencies you buy, how much, and how your rates compare.
Test your current FX provider
There’s an easy way to start.
Next time you have an international payment to make, get your usual quote, then get a second live quote for the same transaction at about the same time, and compare the two.
Markets move constantly, so one comparison won’t tell you everything, but a few will soon show a pattern.
If the difference is small, you know your current pricing is competitive.
If it’s significant, you’ve found a cost worth looking into.
South African businesses work hard to negotiate the price of what they buy.
The currency they buy it with deserves the same attention.
Before your next international payment, compare the rate.
Visit www.smeforex.co.za and request a live quote.
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