FX Forwards Explained: A Guide for Growing Businesses
If you're managing international payments for your business, you've probably heard the term "FX forward" tossed around - usually by someone in a bank or broker's office. And maybe you nodded politely, made a note to "look into it later", then got back to dealing with whatever was on fire that day.
Here’s the good news: FX forwards are much simpler than most people think. And if your business sends or receives money across borders, especially in large or frequent amounts, understanding how they work could save you time, stress, and serious money.
Let’s break it down.
What is an FX forward?
In short, a forward lets you lock in an exchange rate today for a transfer you’ll make in the future.
Imagine you’re a UK-based business due to pay a supplier in the US $250,000 in three months. You check the rate today and it's acceptable. But what happens if the rate shifts against you before the payment date? You could end up paying far more than planned - just because of market movement.
With a forward, you agree the rate now and set the settlement date in the future. When the time comes to pay, the rate is already locked. No surprises.
Why businesses use them
The main reason is protection. Currency markets move constantly, and while that might not matter on a £200 transfer, it can make a real difference on six- or seven-figure payments.
FX forwards are used to:
- Lock in pricing on future imports or exports
- Stabilise cash flow planning
- Protect against currency swings that could hit margins
- Align payments with contract deadlines or payroll cycles
They’re not about speculation. They’re about certainty. That’s why so many CFOs and finance teams rely on them, especially in sectors like manufacturing, logistics, construction, and international services.
How it works in practice
You agree the amount, the currencies involved, and the settlement date. The provider (like ORE) confirms the forward rate based on current market conditions. Once locked in, that rate doesn’t change - regardless of where the market moves.
In most cases, you won’t need to put up the full amount straight away. A deposit or margin may be required, depending on the provider and deal size, but the key benefit is predictability.
When settlement day comes, you fund the full amount and the transfer is executed at the agreed rate. Simple.
What to watch out for
Not all forwards are created equal. Some banks and brokers load extra margin into the forward rate itself, so what looks like protection ends up being another source of hidden cost.
It's also worth checking whether you’re able to cancel or adjust a forward if things change on your end. Flexibility matters.
That’s where a transparent platform makes all the difference - one that lets you view, book, and manage forward contracts clearly, with support when you need it.
If you’re handling international payments and want more control over your exposure, FX forwards are one of the most powerful tools you can use. They help you move from reacting to planning. And when you're running a growing business, that shift can make a real impact.
Want to see how FX forwards work in your business?
Speak to our team or open an account to explore your options today.
