International travel is essential for corporates to grow their business and expand their boundaries. Employees can travel to participate in various corporate events, meet with important clients, or attend educational training sessions. However, traveling to a foreign land brings in the most confusing question, how to exchange foreign currency. As a traveler, you would not want to be stranded in a stranger country with no money. Therefore, let us understand the basics of foreign exchange through this blog.
What is foreign exchange?
Foreign exchange or Forex is the exchange of one currency with another one at a set exchange rate. Forex is crucial to buy and use the services of local businesses in the concerned country. Travelers can use various institutions and organizations that will help them obtain the currency of the traveling country.
1. Understand the exchange rate
The exchange rate is the rate at which one currency can be exchanged for another. They fluctuate regularly daily sometimes numerous times in a day. The rate is influenced by factors such as global events, political resolves, and economic decisions. One wanting to exchange currency will have to refer to the current exchange rate between the two currencies at the time exchange takes place.
You can use various online currency converters to see the real-time exchange they will get for a set amount of money in their currency. It is essential to understand what you will have during your trip to a foreign land and plan your journey accordingly.
2. Use a corporate currency exchange service
Many banks and financial institutions offer currency exchange services for corporate clients. These organizations provide accurate exchange rates with lower exchange fees than traditional forex services. Further, as the corporate spend highly on business trips, it is essential to find the correct forex bank to save significantly on transaction fees.
With such institutions, you get the benefits of a dedicated account manager who will assist you with all the forex taking place for the trip. They will provide you with valuable market trends and insights that will help you with favorable exchange rates and time to execute the transactions. Additionally, you get access to a range of financial products and services including risk management and fraud avoidance tools.
3. Plan ahead
As mentioned, the exchange rates fluctuate with the passing day, so it is important to plan and make the exchange before the date of the trip. This will help you plan the budget for the corporate trip and avoid the risk of abrupt changes that can impact business dealings. Though most countries have open forex, some may limit the currency that may be exchanged in the process. Therefore, you should research and check the restrictions on the foreign currency put upon by the nation. It can lead to changes in the itinerary. Hence, you should be aware of all the regulations before preparing an itinerary for your employees.
4. Have a budget
Having a specific budget is important to avoid overspending and projecting a better ROI for corporate travel. This will help you stop landing inquiries from the organization about the expenses on a business trip. It also helps you make informed decisions about when and how much to exchange.
While setting up a budget, consider the amount of money the employees will need as per their itineraries for accommodation, transport, meals, and transactional and miscellaneous fees. The per diem requirement should be kept as per the living standard of the destination country to avoid major miscalculations. In addition to these, you should also allocate an emergency fund to avoid safety risks.
Suggested Read: A Complete Guide To Business Trip Expense Management
5. Keep receipts
Asking for receipts is one of the best ways to avoid later discrepancies. Additionally, you can track the expenses and provide necessary documents for accounting purposes. Filing receipts will assist you in identifying errors, and promptly solve the issue with the assigned forex manager. Keeping receipts is often a requirement for compliance purposes. For example, if your company is subject to audits, you may require proof of foreign currency transactions to demonstrate compliance with relevant regulations.
6. Consider using a credit card
Travelers can also use credit cards that work fine with ATMs of foreign banks. They offer convenient and cost-effective solutions to pay for the products and services used in foreign countries. There are small processing fees that will be charged on each transaction. You must be aware of the terms and conditions and hidden charges if any before facilitating your employees with such cards.
7. Be aware of local customs and regulations
As for the last step, you should be aware of the local customs and regulations on forex and the currency that you can take along with you to a different country. Further, some countries may require documentation of proof for carrying their currency. Hence, you should understand these laws to avoid delays and major inconveniences.
Understanding the foreign exchange is highly important for international travelers. It will not only help travelers enjoy the trip without worrying about the money but also avoid legal problems.
Suggested Read: Business Travel Payment: The Best Fit For Your Organization
Foreign Exchange For Business FAQs
What is foreign exchange or forex?
Foreign exchange or forex is the act of exchanging one currency for another at a given exchange rate between the two. It is important for travelers to obtain the local currency of the country they are traveling to in order to purchase local goods and services.
What is the exchange rate?
The exchange rate is the rate at which one currency can be exchanged for another. It fluctuates regularly and is influenced by global events, political resolves, and economic decisions.
How can travelers see the real-time exchange rate?
Travelers can use various online currency converters to understand the real-time exchange rate. They will also be able to change the amount of one currency with another by the same online platforms.
