How to help import-export businesses effectively control finances

Mr. Ngo Anh Tuan, Senior Director of Payment Solution Development & CASA Techcombank, said that exchange rate management is not synonymous with finding the cheapest time to buy foreign currency.

“For import-export businesses, it is more important to determine the acceptable cost level to protect the profit margin of the order. Businesses therefore need to simultaneously look at exchange rates, payment time, cash flow and capital costs throughout the entire business cycle,” Mr. Tuan said.

Explaining this, Mr. Tuan said that an import-export transaction usually lasts from the time of signing the contract until completing payment. During that time period, exchange rate fluctuations, the number of foreign currency conversions, and transaction processing speed can all change a business’s actual costs.

A contract is calculated to be profitable when signed, so it is unlikely that the profit level will remain the same when completed. For example, with a payment worth one million CNY, if this currency increases in value by 1% compared to VND from the time the business closes the order, the amount of VND needed to pay will also increase by about 1%. For businesses with profit margins of only a few percent, this difference can significantly affect order efficiency.

In addition to exchange rate fluctuations, the number of foreign currency conversions also affects costs. For example, if a contract with a Chinese partner is priced in CNY but the business must use VND to buy USD, then convert USD to CNY for payment, the transaction will be subject to the buying – selling difference at the two conversion times, and depends on the fluctuations of the VND/USD and USD/CNY exchange rate pairs.

If consistent with current contracts and regulations, direct payment in CNY can help businesses reduce foreign currency conversion by one step, thereby limiting the number of exchange rate pairs that must be monitored and simplifying cost management.

Processing time is also part of the financial equation. If payment or confirmation is late, the partner may delay delivery, release of goods or completion of documents. For businesses that depend on imported raw materials, a few days of delay can impact production schedules, deliveries and commitments to customers.

Businesses may also miss out on early or on-time payment discounts. Therefore, according to Techcombank, the effectiveness of a transaction needs to be viewed as a whole from exchange rates, payment fees, number of conversions to processing time and impact on cash flow.

Three issues SMEs should consider

Techcombank representative said that for large enterprises, exchange rate risk is often managed through specialized financial tools and processes. Meanwhile, for SMEs, the more practical problem is choosing the transaction currency, when to buy foreign currency and how to control the total cost of a transaction.

Therefore, to be more proactive in managing costs and exchange rate risks, businesses can start with three questions. Firstly, can the transaction be performed directly in the payment currency? If consistent with relevant regulations, reducing the number of foreign currency conversion layers can help businesses reduce costs and simplify cash flow tracking.

Second, when should businesses buy foreign currency and do they need to proactively manage exchange rate risk? Planning foreign currency needs helps businesses limit the need to buy urgently. With receivables and payables in foreign currency whose value and timing are relatively clearly determined, businesses can consider appropriate exchange rate management solutions. The goal is not necessarily to predict the best exchange rate at the right time, but to proactively determine costs, thereby limiting the impact of exchange rate fluctuations on profit margins.

Third, what is the total transaction cost? Besides exchange rates, businesses need to consider money transfer fees, number of conversions, processing time and the impact of the transaction on cash flow.

From a cost management perspective, Techcombank develops a solution group for import-export businesses according to three closely connected needs: foreign currency transactions, international payments and capital for business activities.

Currently, the bank supports businesses to directly trade many foreign currencies for import and export activities such as CNY, USD, EUR, AUD, CAD, GBP, HKD, JPY, CHF, KRW, NZD, SGD, THB… suitable for different payment needs.

In addition to over-the-counter transactions, businesses can buy and sell foreign currency online on Techcombank Business, thereby being more proactive about when to make and shortening the international payment process.

Techcombank also launches the “Golden Exchange Rate Day” program on the 10th of every month, with incentives of up to 600 points for transactions and customers who meet the conditions.

For businesses that regularly trade with China, the bank provides cross-border payment solutions in CNY. Businesses can transfer and receive CNY for transactions of buying and selling goods transported by road through Vietnam – China border gates, according to current conditions and regulations.

When appropriate to contract and cash flow needs, direct payment in CNY reduces intermediate foreign currency conversion steps. According to the current program, businesses that meet the conditions can receive preferential exchange rates of up to 45 points and free international money transfer at the counter for CNY transactions.

Regarding capital needs, Techcombank implements the IMEX Lending program for import-export enterprises and SMEs in a number of fields to create growth momentum. The program applies a loan interest rate reduction of up to 1.5%, a maximum total credit limit of 50 billion VND, a loan limit of up to 30 billion VND and an unsecured limit of up to 24 billion VND, depending on conditions and appraisal results.

The bank is also implementing credit packages up to VND 10,000 billion, with preferential interest rates 1-1.5% lower per year than Techcombank’s normal short-term interest rates from time to time.

According to Techcombank, connecting foreign currencies, international payments, digital banking and credit helps businesses handle cross-border financial needs on the same journey. In a volatile international trade context, the ability to control exchange rates, transaction costs and cash flow can directly impact the effectiveness of each order.