How Australian SMEs can stop currency swings eating their margins

For many Australian SMEs, foreign exchange risk doesn’t show up as a one-off dramatic market event. It appears quietly in thinner margins.

Chief executive of global payments company OFX, Skander Malcolm says local SMEs are exposed to global currency markets in a number of ways, from paying for software subscriptions in US dollars, sourcing inventory from overseas suppliers, or paying offshore contracts. He says SMEs are now operating in a world that has become harder to plan around.

“Unless you’re running a small business that’s purely domestic, the geopolitical environment just creates more uncertainty because you need to think about clients and suppliers and what’s happening in their part of the world,” Malcolm says.

In large companies, treasury teams manage this exposure. In smaller businesses, it often lands on the owner’s desk.

Where volatility hits hardest

For SMEs, large currency swings can affect them in ways that feel disproportionate to their scale. Over the past year alone, the Australian dollar has traded roughly between US59c and US71c, a swing of more than US10c.

In that circumstance, inventory priced in US dollars can suddenly cost far more in Australian dollars than budgeted.

“For an SME, that kind of movement can materially affect purchasing power if the exposure is not managed,” Malcolm says.

The challenge is that many businesses only think about exchange rates at the moment they need to make a payment. By that stage, the currency has already moved.

Some savvy businesses are approaching this challenge more strategically.

Sydney-based marketing technology company and OFX client, Blend AI, is an example of this phenomenon.

The business works with international clients and suppliers, meaning cross border payments are a regular part of operations.

Co-founder Dean Krowitz says the company initially found itself paying unnecessary conversion fees across multiple transactions.

“Every month we were paying suppliers and clients internationally and everyone wanted to clip the ticket whether that be the exporter, the bank or the credit card company we use,” Krowitz says.

The business eventually shifted to OFX where it could receive and hold funds in the currency it regularly spends, avoiding repeated conversions that can quietly erode margins.

“With OFX I now have a local US account that’ll receive and hold US funds, because I know those funds will go out again in the US.”

“So why lose money converting it back to AUD?” Krowitz says.

For Krowitz, the shift was not only about cost. It also simplified operations.

Blend AI now uses automated processes for recurring payments and OFX’s virtual cards for specific purchases. The company estimates it saves around five hours of administrative work each week.

“We have a team in the US who need to cover a few operational costs. And so we spun up some virtual cards, and that’s worked really well. I can just spin up a virtual card really quickly to purchase things safely and silo the money off,” Krowitz says.

Businesses are also turning to hedging strategies, such as forward contracts, to lock in today’s current rate for a future payment, bringing budget certainty to large, one-off exposures. Tools that were once managed by corporate treasury teams can now be accessed through digital platforms such as OFX and integrated directly into their accounts payable workflows and accounting software.

According to Malcolm, the key is giving business owners more control over how and when they convert currency.

“Clients often find that once payments and currencies are structured properly, they spend far less time dealing with the mechanics of international transactions,” he says.

“That frees them up to focus on running the business rather than managing payments.”

Malcolm says cost transparency is another factor.

Three practical steps for SMEs

For businesses looking to reduce the impact of currency swings, the starting point is often visibility and control.

• Map exposures. List every currency in which you pay and receive and how often this occurs — this reveals where you are losing margin through repeated conversions. Consider whether hedging strategies, such as forward contracts, are appropriate for your business.

• Hold funds in currencies where you spend. Multi-currency accounts let you access local bank details to pay suppliers and collect payments, avoiding repeated, unnecessary conversions.
• View and manage both local and cross border payments through a single platform. Connecting it to your accounting or treasury systems removes manual reconciliation and keeps workflows consistent. Virtual cards can also be used for recurring subscriptions, helping businesses control spending that often creeps into month end.

Exchange-rate swings are not an anomaly. They are part of doing business internationally.

The path to resilience is not technical brilliance, but sensible systems.

Businesses that understand where their currency exposure sits and put simple systems around payments can turn what once felt like an unpredictable threat into a manageable operating cost.

In many cases, the solution is not complex financial engineering but practical financial hygiene: knowing where currency exposure exists, structuring payments more efficiently and automating routine transactions.

For business owners juggling multiple responsibilities, that clarity can make a meaningful difference to both margins and time.

For more information, please visit OFX Business.