Advice on accepting foreign payments
Discussion
I would just like to know how others receive payment in foreign currency - e.g. USD. Is there a particular webpage you use for exchange rate? How do you protect yourself against currency fluctuation during the invoice period? When does a foreign currency account become viable..?
If my venture takes off as planned, I may well have a lot of foreign currency payments, so a USD$ account may well be useful in the future (being probably the most common currency behind £-sterling. In the meantime though, I would just like to make sure I am following a reasonable plan when invoicing foreign work.
Thanks!
If my venture takes off as planned, I may well have a lot of foreign currency payments, so a USD$ account may well be useful in the future (being probably the most common currency behind £-sterling. In the meantime though, I would just like to make sure I am following a reasonable plan when invoicing foreign work.
Thanks!
Buffalo said:
I would just like to know how others receive payment in foreign currency - e.g. USD. Is there a particular webpage you use for exchange rate? How do you protect yourself against currency fluctuation during the invoice period? When does a foreign currency account become viable..?
If my venture takes off as planned, I may well have a lot of foreign currency payments, so a USD$ account may well be useful in the future (being probably the most common currency behind £-sterling. In the meantime though, I would just like to make sure I am following a reasonable plan when invoicing foreign work.
Thanks!
If you are issuing invoices in GBP then that is the amount that you should expect to receive in your account in GBP, irrespective of the exchange rate of the currency that the client may want to pay in. Assuming that four fee quote and invoice is in GBP then the exchange rate risk should be the client's and not yours. If my venture takes off as planned, I may well have a lot of foreign currency payments, so a USD$ account may well be useful in the future (being probably the most common currency behind £-sterling. In the meantime though, I would just like to make sure I am following a reasonable plan when invoicing foreign work.
Thanks!
Mandat said:
If you are issuing invoices in GBP then that is the amount that you should expect to receive in your account in GBP, irrespective of the exchange rate of the currency that the client may want to pay in.
Be aware that international payments can sometimes incur fees from the receiving bank, so you may receive less than your customer actually transferred.I had a reply this morning stating that a client can only pay in USD or CAD - it caught me out as so far invoicing in UKP has not had issue and this wasn't mentioned before I took on the work (quote in £, etc.). My bank can accept either of these without any particular cost to my account, so I can accept either currency rather than UKP, but yes, I understand that I take on risk through currency fluctuations. I therefore wondered what I can do to ensure that I am mitigating risk to my business as much as possible - i.e. how to pick a rate, etc.
Buffalo said:
I had a reply this morning stating that a client can only pay in USD or CAD - it caught me out as so far invoicing in UKP has not had issue and this wasn't mentioned before I took on the work (quote in £, etc.). My bank can accept either of these without any particular cost to my account, so I can accept either currency rather than UKP, but yes, I understand that I take on risk through currency fluctuations. I therefore wondered what I can do to ensure that I am mitigating risk to my business as much as possible - i.e. how to pick a rate, etc.
Your customer is lying.Simply put, if they're in Canada then they have exactly the same foreign exchange facilities available to them as you do. The only reason they don't want to pay in GBP is to put all of the currency risk onto you instead of on them.
As I see it you have two issues. Firstly the risk of currency, which you have recognised. The second risk is the risk of late or non payment. Given that the customer is being a bit shifty already, I would consider that quite carefully.
It's tricky to pick a spot rate - you'll have to go on a pessimistic rate, which will mean you'll need to jack the price up quite significantly to be safe. The alternative is to go with something like a forward contract where you agree to buy a certain number of pounds with dollars at an agreed rate on a particular day in the future.
The problem with forward contracts and options is that they mature on a particular day, and I'm going to guess you might have a bit of a problem working out the correct day for that to happen. You'll also need somewhere for the money to sit while you're waiting for it to mature.
So I think the sensible option for you will be factoring - where you effectively sell the invoice to the factoring company (often a bank) for around 10% of the value of the invoice. Included in the bank's costs will be the currency conversion, so you get the benefit of taking that out of the equation too. Obviously you'll need to account for that in the quote, but you're fully within your rights to re-quote if you want.
Your own bank will likely provide factoring services, so talk to your account manager. Other banks may well offer better value, so you should shop around.
Alternatively, explaining to your customer that you'll have to increase the quote to take account of the difficulties in foreign exchange may well make them reconsider.
We bill regularly in EUR and or USD. We used to have a Dollar account and kept the money in there until it was more favourable for us to transfer into Sterling but we found this put a strain on cash-flow so now it all goes in to the same account and gets converted when the money lands. Some we win, some we loose.
We're selling a service so there's no cost of sales as such, selling a product may be a little more different.
We're selling a service so there's no cost of sales as such, selling a product may be a little more different.
Ean218 said:
A fairly basic question but why are you invoicing in a foreign currency?
If you invoice in sterling the currency risk goes away, the customer just pays into your bank account using the IBAN no. and its no different to a domestic sale.
This is what I did, no problems at all. I ask for £x and get £x, they do the rest. Mind you that was a big international company so they'd have been geared up for that kind of thing.If you invoice in sterling the currency risk goes away, the customer just pays into your bank account using the IBAN no. and its no different to a domestic sale.
Did you quote in GBP? If so then that's what they should pay IMHO.
Buffalo said:
I had a reply this morning stating that a client can only pay in USD or CAD - it caught me out as so far invoicing in UKP has not had issue and this wasn't mentioned before I took on the work (quote in £, etc.). My bank can accept either of these without any particular cost to my account, so I can accept either currency rather than UKP, but yes, I understand that I take on risk through currency fluctuations. I therefore wondered what I can do to ensure that I am mitigating risk to my business as much as possible - i.e. how to pick a rate, etc.
As already pointed out above the client is talking b
ks. He doesn't want to pay in GBP.Reply the customer pointing out that since you quoted in GBP and invoice in GBP you expect to be paid in GBP. Additionally, I'd offer to also state the amount due in USD on the invoices - then double the GBP amount at least!
Eg, he can either pay GBP 5,000 or USD 10,000
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