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You've got a €100,000 invoice due next month — but the exchange rate just shifted, and suddenly it's €3,000 more expensive than you first budgeted. For businesses making cross-border payments, this kind of last-minute surprise isn't rare — it's routine. And it's a major reason profit margins slip or forecasts go sideways.
Fixed forward payment contracts are one way to prevent that. They let you lock in today's exchange rate for a specific future payment, protecting your business from the uncertainty that comes with currency fluctuations.
Whether you're paying suppliers abroad, buying international stock, or managing contractor payments in foreign currencies, understanding how fixed forward payments work can save you thousands of euros and make your financial planning much more predictable.
What is a fixed forward payment contract?
A fixed forward payment contract is a financial agreement where a business locks in an exchange rate for a specific amount of currency to be exchanged on a future date.
Think of it as reserving your exchange rate in advance. Instead of rolling the dice on what EUR/USD or GBP/EUR will be next month, you agree today on the exact rate you'll pay when your invoice comes due. These contracts remove uncertainty from international payments by guaranteeing the cost in your home (functional) currency, no matter how the market rate moves between now and your payment date.
Unlike spot transactions (which are based on the rate at the moment of payment), fixed forward payments provide certainty in advance, making them ideal for businesses with scheduled payment needs. You know exactly what that supplier invoice will cost you in euros, regardless of whether the market moves 2% in your favour or 3% against you.
For SMBs managing tight margins and budgets, this predictability can be the difference between a profitable quarter and an unpleasant surprise.
How do fixed forward payment contracts work in practice?
The beauty of fixed FX forward payment contracts is their simplicity. Once you've set the terms, there's no need to monitor exchange rates, worry about market timing, or stress about budget overruns due to currency swings.
Most providers will require a minimum payment amount to ensure there's enough value for both parties but this threshold is typically much lower than what banks require, making forward payments accessible to growing SMBs — not just large corporations.
How do fixed forward payment contracts work in practice?
Fixed forward payments shine brightest when payment timing and amounts are known well in advance. They're your go-to tool when you need to eliminate guesswork from international payment costs and protect your margins from currency swings.
Here are the most common scenarios where we see businesses using fixed forward payments effectively:
1. Scheduled supplier payment for equipment
Let's say you ordered some new equipment and have a large invoice due in 90 days to your overseas supplier. Rather than take your chances with currency movements, you lock in today's exchange rate using a fixed forward payment contract. If your home currency weakens over the next three months, you're protected. If it strengthens, you miss out on potential savings — but you've eliminated the risk of budget overruns. For large orders, this predictability can make the difference between staying on budget and having to explain cost overruns to stakeholders or shareholders.
Fixed forward payments give you certainty from the outset and protect your margins regardless of currency fluctuations. There's no need to monitor exchange rates, second-guess whether they'll go up or down, or try to manually time spot transactions — you already know exactly what you'll pay and when, in your home currency.
2. Rent or lease payments in a foreign currency
You have a 12-month lease on overseas office space with monthly rent fixed in the local currency.
Since your revenue is in your home currency, those monthly payments are vulnerable to exchange rate swings. A 3% currency move could add thousands to your annual costs, making budgeting a nightmare.
To stabilise your costs, you lock in the full year of currency conversions in advance with fixed forward payments. This approach gives you total visibility into your rent costs in your home currency no matter how the market moves over the next 12 months.
These predictable costs make budgeting easier, reduce internal back-and-forth about fluctuating expenses, and give you room to plan for other operational costs without currency uncertainty eating into your calculations.
3. Milestone-based contractor payments abroad
Let’s say you have a six-month contract with an overseas agency, with three milestone payments agreed in their local currency.
Because the payment dates and amounts are fixed, you set up three separate fixed forward payment contracts to lock in the exchange rate for each milestone. Whether it's month two, month four, or month six, you know the exact cost of every payment in your home currency from day one.
This approach eliminates surprises and helps with project budgeting and reporting — especially useful if you're tracking spend across multiple teams or need to provide cost forecasts to shareholders or stakeholders.
Plus, it keeps the payment process smooth for your contractor abroad, since they know you can pay the agreed amount on schedule without currency-related delays or amount discrepancies.
How are fixed forward payments different from other FX forward payments?
These scenarios demonstrate how effective a fixed forward payment can be for specific payment needs. But it's not the only type of deliverable forward payment contract you can use to manage currency risk.
Fixed forward payments are the simple, predictable type. Both the amount and the payment date are set in stone from day one, making them ideal for scheduled payments with clear amounts and due dates.
The trade-off for this simplicity? While fixed forward payments typically offer better exchange rates than alternatives — since your provider has complete certainty about timing and volume — you won’t have flexibility if payment details change. Plus, you won’t benefit from the upside if exchange rates move in your favour after you've locked in.
Fixed forward payments vs flexible forward payments
Flexible forward payments also lock in an exchange rate, but are more (you guessed it) flexible as you can draw down portions of the agreed total during a window of time instead of settling everything in one go.
In other words, fixed forward payments work best when your payment dates and amounts are confirmed. Flexible forward payments make sense when you're managing rolling payments or variable schedules.
Say you've got ongoing supplier payments over the next six months as you draw down stock but aren't sure of the exact timing — a flexible forward payment lets you convert chunks of currency as needed while maintaining your locked-in rate.
It's worth noting that this flexibility usually comes with a slightly less favourable rate than fixed forward payments, since your bank or cross-border payment provider has less visibility of when the money will actually move.
Fixed forward payments vs dynamic forward payments
Dynamic forward payments are arguably the most complex contract type, combining protection with the chance to benefit if exchange rates move in your favour.
These contracts lock in a guaranteed minimum rate but allow some participation in better market rates at settlement. It's like having a safety net with upside potential — you know the worst-case scenario for your costs, but you might pay less if the market moves your way.
Naturally, dynamic forward payments are more complex and typically better suited for businesses with higher FX volumes or those who closely track currency movements. They also generally come with less favourable guaranteed exchange rates than fixed forward payments, since you're getting that potential upside.
The choice ultimately comes down to your priorities. If you want certainty and simplicity above all else, fixed forward payments are your best bet. If you're willing to accept more moving parts in exchange for potential savings when rates improve, dynamic forward payments might be worth exploring.
How to start using fixed forward payment contracts with iBanFirst?
Fixed forward payments are simple, predictable, and increasingly used by international SMBs — not just large corporations with dedicated treasury teams. They're an accessible tool that any business managing multiple currencies should have access to.
And the benefits are clear: Keep your costs certain, protect your profit margin, and manage your budget with precision. No more surprises when exchange rates shift between signing a contract and making a payment.
We've built iBanFirst specifically to support international SMBs managing multiple currencies.
Here's what you'll get access to when you open your account:
- A multi-currency account to hold, receive, send and track funds in 25+ currencies
- Fixed, flexible and dynamic forward payment contracts that can be set up in minutes through our platform
- In-house FX specialists who understand your business and can help you choose the right approach for your business
...All with transparent pricing and no hidden fees!
Ready to protect your international payment margins? Open an account today — it's simple, fast and you'll have access to our FX experts from day one.
Common follow-up questions
Fixed forward payment contracts can be a little tricky. Here are the key questions we regularly receive from businesses exploring their options.
What happens if I miss the settlement date?
If the scheduled payment doesn't happen on time, the contract still stands — it's a firm agreement.
You may be able to reschedule or roll the payment contract forward, but this often comes with added costs or a new exchange rate. In some cases, you'll be required to settle the contract financially, even if the actual payment is delayed.
This is why fixed forward payments work best when your payment date is contractually fixed or operationally guaranteed. If there's any chance of delay, flexible contract payments may offer a better fit.
Can I cancel or change a fixed forward payment once it's booked?
Fixed forward payments are binding agreements. Cancelling one can trigger fees and — depending on market movements — you might have to cover the rate difference.
Some providers allow changes before a certain cut-off, but these are usually case-specific and typically involve a revised rate. Because of this, you should only book a fixed forward payment when you're confident about the underlying payment details.
If there's any uncertainty — whether about the amount or the timing — flexible contracts or simply waiting for more clarity may be a better option.
How far in advance can I book a fixed forward payment?
Most providers allow you to book fixed forward payments up to 12 months in advance — sometimes longer, depending on your provider, FX volume and currencies.
Booking early allows you to build forward visibility into future expenses and protect margins on long-term projects or commitments. However, the longer the timeframe, the more likely your provider will include a wider spread in the rate to account for uncertainty.
Fixed forward payments are especially useful for annual contracts, planned asset purchases, or financing arrangements with set timelines. If your timeline is longer than a year, ask your provider about building a structured calendar of forward payments.
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