Industry News
July 12, 2024
10 mins

3 Common Currency Challenges Faced by SME Business Owners

Harry Mills

SME business owners have a lot on their plate, and as companies increasingly engage in international trade, a new set of financial challenges awaits to distract and add to the to-do list.

Fluctuating exchange rates, currency conversion fees, and the complexities of cross-border transactions can significantly impact an SME’s profitability and operational efficiency, but help isn’t far away, nor is it costly or time-consuming.

Currency fluctuations

By far, the most commonly faced, yet poorly addressed currency challenge is dealing with market fluctuations. Exchange rates can be highly volatile, meaning they can change dramatically from one day to the next, and rates can swing wildly and can make double-digit percentage moves overtime.

Here’s a chart of the pound vs the US dollar for the past ten years, to demonstrate this:

GBP v USD from 2014 - 2024

Currency exposure can materially impact a company's financial health, sometimes meaning the difference between making a profit and a loss, but dealing with it doesn’t mean becoming an FX trader, constantly looking at the exchange rate, or building complex hedging strategies.

Some businesses can ride the ups and downs of the market because their prices change with the exchange rate. These companies probably shouldn’t pre-book currency via forward contracts, as the gain or loss is likely to be a binary outcome: either they get it right or they get it wrong –this is a bad situation to be in, so we regularly tell businesses not to attempt to hedge their FX risk if they don’t need to.

But this isn’t the norm, and most businesses probably should do some form of currency hedging if they import or export (or both).

Our advice is to speak with a specialist that is qualified, experienced, and has a proven track record of helping businesses to successfully navigate volatile currency markets.

The idea is to come up with an approach that dictates how much, how far, and how often you should lock-in exchange rates for the future.This gives your business insulation against unfavourable market movements, helps to secure your profit margins, and protects your earnings (and dividends, ultimately).

By working with a qualified currency risk specialist, you can minimise the impact of currency fluctuations, meaning you can focus on your business and achieving your goals.

Conversion fees

The next challenge is arguably the easitest to fix, but it comes with a health warning in that not everything might be as it seems...

The banks have been overcharging SMEs for foreign exchange services for years, hiding fees of up to 4% in their exchange rates, and taking money out of the pockets of hard-working business owners.

The broker, or non-bank FX, market was formed to address the inefficiencies from banks but, greed has taken over, and brokers routinely engage in dishonest and opaque pricing behaviours, offering great rates to begin with, but “price-walking” over time to take advantage of their comfortable clients.


Here are our top three ways that currency costs can add up: 

1. Poor rates: This is the exchange rate that you receive versus the real, interbank (market) rate. Banks and brokers mark-up the interbank rate sometimes by as much as 4%, meaning a business trading £10 million per year could be over-charged by between £100k-£400k!


2. Payment fees: Most banks charge a payment fee of up to £35 per international transfer, despite very low costs. By working with a payments provider with low or no fees, the annual saving for an SME could be thousands, with larger companies saving tens of thousands.


3. Automatic conversions: Receiving foreign currency into a domestic bank account often attracts excessive conversion fees in the form of the mark-up applied. Charges are typically between 2.5-5%,making this one expense that is easily avoided with an efficient multi-currency account.


Luckily for you, as a Gravitate client you can check your currency costs through our transaction cost analysis part of our currency health check. We’ll tell you your real FX trading costs and let you know if you could get a better deal elsewhere.

Bad advice

And finally, it seems that everyone thinks they’re a currency trader nowadays, and predictions and forecasts over future exchange rates have never been so prevalent. The thing to remember is that anybody can make a prediction, but nobody knows!

Have you ever taken a call from an FX broker on the last day of the month of quarter? It’s a bit of a clichéd joke in our office that everyday is a good day to trade, but seriously, FX brokers exist to generate tradingprofit from their clients, to hit revenue targets, and to make commission forthemselves.


This is arguably a conflict of interests, as in reality, not every day is the best day to trade and, businesses should only trade if it is in their interests to do so.


In a very busy marketplace, there are a few good people offering good advice and great solutions, so if you’re fortunate enough to work with someone you trust, that works for you, and doesn’t push you into trading, then that’s a great place to be.


When it comes to the best support and guidance for your business, as a business owner you will have an instinct as to what makes sense for your company, but you should be looking for advice that is tailored to you, and is based on detailed discussions about your company, goals, and market.There’s no one-size-fits-all approach to FX management, so take the time to get your choice of currency provider right!


Bad advice can be incredibly costly, especially if you end up trading in such a way that puts your business at risk, say trading more than you might ordinarily because of a “market rally”. There is also a proliferation of highly complex derivatives trades being sold to business owners, offering better-than market rates from the outside, but with huge downside risks if the market goes a certain way. You should avoid these programs altogether as you are adding risk, not taking it away by engaging.


Summary and where to turn for help!

 The three main currency challenges that SME business owners face are market fluctuations, poor currency pricing, and bad advice. All three of these challenges can be solved by working with a professional currency partner, who’s interests are aligned to yours, and who works to a clear set of business principles.

You can arrange a call with me, or a member of our team, to take the first step in understanding your currency situation and the impact of any improvements we can suggest.

For a free, comprehensive currency audit to any business working with Gravitate. Learn more and submit your enquiry at:

 Write to:

Call us on: 0203 838 0250

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Harry Mills

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