Dealing with payments made in multiple currencies can make performing accounting tasks much more difficult.
The rise of digital has meant that even small businesses can have customers in any part of the world. Although this brings a lot of opportunity for success, it does mean that you may be faced with challenges that you wouldn't normally encounter. One of these is having to deal with a range of currencies. Although you probably work in pounds if you are based in the UK, you may be trading with people in other parts of Europe, the US or elsewhere who operate in different currencies.
This can cause problems when it comes to settling invoices and making sure you are being paid the right amount. You also need to ensure that no party is being charged more than necessary or losing out through poor exchange rates. For example, you may be invoicing someone in the US for £400, which you work out to be $425. However, by the time they come to pay the amount, the rates have changed and your client only pays $410 across. This can make a significant difference if you are using multiple currencies for a significant amount of your revenue.
By following a few simple tips, you can help make it easier for your business to trade with companies who primarily use other currencies.
Agree on a conversion rate
Conversion rates change all the time, and this can cause a lot of confusion between you and your client. At the start of your contract, agree on a place that you will consult for the exchange rate. Many people use the European Central Bank (ECB) as it can give live and competitive rates, which are internationally recognised. It doesn't really matter where you decide as long as it's reputable, but this is likely to remove a lot of tension further down the line.
Don't forget taxes
You'll also want to make sure that you and your client are both aware of any import/export taxes and banking charges that will apply to your transactions. It's important to discuss how these will be calculated into the bill to make sure neither of you feel as though you are losing out.
Look into software
This may only be worthwhile if you have a significant amount of your revenue coming from other countries, but there is software designed to solve this exact problem. It can allow you to generate invoices in multiple currencies, as well as calculating any bank charges that apply and exchange rates. This software may be worth it if you find that you are spending a lot of time or money on trying to solve currency disputes, even if you only have a handful of clients in other countries.
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