Secure foreign currency cash flow while working internationally
Businesses that supply products or services to the entertainment industry can mitigate currency risks by working with a foreign exchange specialist.
Conducting business abroad can offer compelling benefits, from access to new markets to lower operational costs. The entertainment industry, in particular, often benefits from producing work all over the world, as musicians tour the globe and production companies film in exotic locations. With any project, managing the cash flows associated with payroll, accommodations, equipment, and other expenses can prove challenging. However, with international ventures, the added component of exchange rate volatility comes into play. The ever-changing value of the U.S. dollar against the world's currencies can often cause production costs to vary, wreaking havoc on even the most well planned budgets.
"My clients want to be able to sleep soundly at night, knowing their budgets are balanced," says Autumn Krischer, Director and Senior Specialist, Wells Fargo Foreign Exchange Services. "Whether it's for hiring and transporting talent, or finding a lighting crew, it is often beneficial and even necessary to transact in local currency. Consider working with a foreign exchange specialist to help you overcome the challenges of foreign operating cash flow and budgeting for international productions. That way, you can focus on what is most important: the logistics of your documentary series in Russia or music video in Japan."
Managing Exchange Rate Fluctuation
The value of the U.S. dollar changes constantly. Without effective risk management, this volatility can create uncertainty around foreign expenses and, ultimately, have an impact on your production's profits. Developing a plan to effectively manage exchange rate volatility can help you forecast expenditures and potentially decrease costs.
One way in which many companies manage currency risk is by locking in exchange rates upfront when making immediate or long-term payments. "When a business does an international transfer in U.S. Dollars, they are reliant on a third party to convert their funds into the local currency. They lose control over the exchange process, and don't have visibility into the exchange rate applied until after the transaction has occurred. This may result in the underpayment or overpayment of a vendor in local currency," Krischer says. "Working directly with your bank's foreign exchange department, you can convert the funds upfront, to ensure that your beneficiary is paid in full. This is especially critical when paying staff payroll and expenses for in-country productions."
Getting invoices in local currency is another way many businesses manage currency risk. By offering to pay in local currency, you may be able to negotiate lower prices with your vendors. "If you negotiate in U.S. Dollars, foreign vendors will often inflate their prices to protect themselves against unfavorable fluctuations in the exchange rate," says Carine Gursky, Foreign Exchange Manager at Wells Fargo. By asking for pricing in local currency terms when negotiating transportation costs, filming venues, or foreign accommodations, exchange rate considerations are removed as a potential obstacle in negotiating costs down.
Creating a strategy to manage currency volatility can help you minimize risk and maximize opportunities. For example, the U.S. dollar saw significant appreciation against the world's currencies over the past year. A strong U.S. dollar can work in your favor by lowering the U.S. dollar cost of foreign goods and services and, in turn, increase your purchasing power. When evaluating your next location for a video shoot, for example, you may want to consider the value of the country's currency against the U.S. Dollar. The weaker the currency, the farther your U.S. dollars will likely go.
Managing Your Foreign Payables
Whether your company is on the road for a music tour in Brazil or producing a film in Romania, time zone differences can create challenges with your accounts payables. To make payments conveniently and securely, you should consider using a foreign exchange wire transfer service that is available 24 hours a day with real-time rates. "Even if your bank isn't open in the U.S., an online platform with 24-7 access can allow you to send money whenever it is convenient for you — to Europe, Asia, wherever," according to Krischer.
In addition to online platforms, there are multiple foreign exchange products and services available to assist you in not only moving money around the world but managing the currency risk associated with doing business in other countries. Working together with your local FX Specialist, you can uncover the right solutions to help you minimize risk and maximize opportunities to succeed globally.
For more information on Wells Fargo Foreign Exchange Services, contact 1-866-408-3061.