Nov 28, 2024
Saving Big by Paying in Local Currency
Client Overview:
Our client, a mid-sized manufacturing company, regularly imports goods from a supplier in China. The supplier offered the flexibility of paying invoices in either USD or CNY (Renminbi). Historically, the client opted for USD payments, assuming it was simpler and more efficient.
The Challenge:
During a routine consultation with PulseFX, we noticed that the client’s supplier priced USD invoices with a significant markup. Upon investigation, it became clear that the supplier was adding a "currency risk" buffer of approximately 5% to mitigate potential fluctuations in the USD/CNY exchange rate.
While convenient for the supplier, this arrangement resulted in higher costs for our client. They were essentially paying a premium for the supplier to hedge against currency risks.
Our Solution:
We advised the client to pay in CNY instead of USD, leveraging our competitive exchange rates and expertise in navigating cross-border payments. By switching to direct CNY payments, the client could bypass the supplier's built-in currency buffer and achieve more transparent pricing.
Our team facilitated the process by: Providing Transparent Exchange Rates: Offering market-leading CNY exchange rates, typically 1-3% better than standard bank rates.
Streamlining Payments: Setting up direct CNY transfers to the supplier, ensuring a smooth transition and compliance with international payment regulations.
Educating the Client: Helping the client understand the long-term benefits of paying in local currency, including stronger supplier relationships and lower costs.
The Results: By paying in CNY, the client saved close to 5% on their invoice costs. For an annual import volume of $2 million USD-equivalent, this translated to nearly $100,000 in savings.
Key Takeaways:
Currency Choice Matters: Paying in local currency can help businesses avoid unnecessary markups and strengthen supplier relationships.
Expert Guidance Pays Off: Partnering with PulseFX ensured the client could navigate the complexities of international payments with confidence.
Real Savings, Real Impact: The client reinvested the savings into their business, enhancing their bottom line and operational efficiency.
At PulseFX, we specialize in uncovering hidden savings in cross-border transactions. Ready to optimize your payments and protect your margins? Let’s chat! 🌍