Countless businesses in the UK use foreign exchange to maximise their revenue.
According to Bloomberg, the most common trades are corporate spot trades, forwards and options. FX enables you to protect your investment from currency fluctuations, but have you considered the differences between FX and external FX?
Both have their advantages but knowing which one to choose can boost your business. So, where do you start?
Here is your guide to internal FX.
Table of Contents
Internal FX: A Definition
Internal FX is when you exchange one currency for a second one using the internal resources of your own company. Whereas external FX relies on outside help from third-party FX companies, internal FX is all in-house.
You can use internal or external FX to hedge your investments and reduce your financial risk. You can make a profit from your currency exchanges and boost your payment efficiency for overseas clients. Let’s look at the other benefits and drawbacks of internal FX.
Benefits of Internal FX
Internal FX is often cheaper than external options. When you hire specialist third-party financial companies, you need to account for the extra expense. But it can be well worth the investment.
Avoiding third-party involvement can make communication easier. You only deal with in-house staff, but if your business is large, this can be hard work and complex to implement. If you only have a small business, you may prefer internal FX, but as your company grows, external options can take a weight off your mind.
You will also have all your FX records in-house, which may be a benefit or a burden depending on your company’s archival capacity. External FX companies can handle your FX records for you, giving you vital updates and making everything streamlined.
Drawbacks of Internal FX
Internal FX stretches your company’s resources even further. Your financial department will have extra tasks to complete, and you may have to hire more staff to manage it all. This offsets the financial savings of using internal FX, and it may be cheaper to outsource.
Your internal FX team will likely have many specialists, but external FX teams specialise in the forex market. This means they can track movement and volatility, and they are experts at spotting new investment or hedging opportunities.
You may need to pay for specialist training for your staff or create an internal FX department, increasing costs and stretching your business.
External FX companies know how to find the best spot trades, forwards and options. They handle all of the negotiation and updates for you, so you and your team can focus on the rest of your business.
Choose the Best Option for Your Business
Internal FX is always a convenient option for your business. You keep everything within your company’s reach, and you can still benefit from the forex market in your business ventures.
However, you may wish to hire an external FX team to take full advantage of their expertise and free up company resources for other tasks.
The choice is in your hands. We hope you enjoyed this guide. For more financial and business tips, head over to the rest of our site!
