How FX Forward Contracts Help Businesses Manage Currency Risk

Imagine this: You agree to buy €250,000 worth of goods from a supplier in Europe. You’ve locked in pricing, set your budget, and the margin looks solid.
But payment’s not due for 90 days.
If the euro strengthens in that time, your cost in pounds or Aussie dollars rises—potentially by thousands. That difference doesn’t show up as a new line item, but it eats straight into your margin. And you didn’t do anything wrong.
This is where an FX forward contract can make all the difference.

What is an FX Forward?

An FX forward contract lets you lock in today’s exchange rate for a payment you’ll make (or receive) in the future. It’s a simple, powerful way to remove uncertainty from cross-border transactions.
Unlike spot FX (which settles in 1-2 business days), forwards are scheduled for future dates 30, 90, 180 days or more. They’re custom agreements between you and your FX provider, tailored to your payment schedule and currency pair.

In plain terms:
Spot = buy now
Forward = buy later, at today’s rate

Why it Matters: A Quick Example

You’re a UK-based importer with a €250,000 payment due in 90 days.
Today’s rate: 0.8600 → You expect to pay £215,000
If it moves to 0.8900 → You end up paying £222,500
That’s £7,500 lost, purely from market movement.

A forward contract lets you lock in the original rate and avoid the risk altogether.

Why SMEs Use Forward Contracts

For growing businesses, forwards offer:
Certainty – Know your cost or revenue in advance
Confidence – Price international deals without FX anxiety
Flexibility – Align payment dates with your actual cash flow

Things to Watch Out For

While forwards are useful, they’re not risk-free:
Over-hedging – If a deal falls through, you’re still on the hook for the forward
No upside – If the market moves in your favour, you don’t benefit, you’re locked in
Credit limits – Large forwards may require approval or collateral
These risks can be managed through better forecasting, flexible contract structures, and tools that link your hedging to actual exposures in real time.

How Bretton Makes Forwards Smarter

Traditionally, managing forwards has been manual and messy. Spreadsheets, guesswork, late-night emails to your bank.

Bretton changes that.
Get clear visibility of your FX exposure through our visual FX Tool
Use our AI agent to explain what you’re seeing, and what it means for your margin
Set alerts when currency movements threaten your bottom line

We help SMEs protect what they’ve earned, without needing a treasury team.

Want to See It in Action?
Try our free Playzone tool. In under two minutes, you’ll see how a forward contract could protect your next international payment.