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Money Know-How

5 Overseas Cash Flow Management Strategies

5 Overseas Cash Flow Management Strategies

Managing an international business is no easy feat – handling geographically dispersed teams, catering to an international client base, large-scale operations… the list goes on. But among all aspects of an international business, the management of cash flow is a real challenge. Currency fluctuations, uncertainty about profit margins, different credit period and new finance rules can make cash flow management extremely difficult, leading your business to lose its creditworthiness in the long run.

With international businesses being an integral part of the era of globalisation, it’s all about strategizing it right. Let’s take you through five strategies that will help you manage your cash flow like a pro.

1. Have A Foreign Currency Account For Your Business

5 Overseas Cash Flow Management Strategies

If your business deals in a particular currency quite often, then it’s best to have a foreign currency account for your business. It helps you be cash ready and enables you to process cash payments quickly. A huge plus is that it eliminates the risk of losing money during currency exchange. Let’s give you an example of how a foreign currency account can help you.

Case in point – An overseas supplier has raised an invoice which you need to clear immediately to procure the goods. A foreign currency account will help you clear the invoice right away. You don’t have to waste time or money in order to exchange the currency for paying your vendor. Both onshore and offshore banks offer the services of a foreign currency account.

2. Use A Budgeting Tool

Technological innovations such as budgeting tools are lifesavers for international businesses. Tools such as Scoro, Centage, Profix, Planguru, etc. save you the time and labour of calculating total currency exposure for multiple international invoices by automating everything. They are easy to use, keep you updated about new features and offer high security. With the help of these tools, a business can find out the inflow and outflow of cash in their home currency. Once you determine that, you are in a better position to make well-informed decisions.

3. Avoid Redundancy, Omission & Errors

Avoid ‘double counting’ cash flows from assets recognised separately on the entity’s statement of financial position. This particularly relates to receipts from trade receivables, receipts of refundable GST, and receipts from the sale of finished inventory. Other than redundancies, it is equally important to keep an eye on errors too. The omission of inflow and outflow of cash, treating net profits and cash flow equally, not reconciling your books, not analyzing all the necessary tax forms, etc. are some of the most common errors to avoid while managing cash flow.

4. Leverage The Currency Option

5 Overseas Cash Flow Management Strategies

You must have come across the term ‘forward contract’. It’s a contract as per which you can purchase a set amount of currency at a set currency exchange value. Basically, it protects you against any currency rate fluctuation. Currency option is somewhat similar to a forward contract. However, there is no obligation to exercise it. If the currency rate is in your favour, you can leverage this option. Consider currency option when the demand is not certain or when the purchasing parameters are not completely known.

5. Choose To Transfer Online

Settle international invoices online. Transfer money online with InstaReM. InstaReM doesn’t charge any FX margins and eliminates all hidden charges, making overseas money transfers a cost-efficient affair. InstaReM also enables businesses to make bulk payments through Masspay, a configurable solution for corporate / SME users to manage and control their high-volume remittances to multiple beneficiaries in multiple currencies via a seamless process.