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Two currencies, one invoice: Improve your SME’s bottom line by being proactive

by Saskia Johnston | Nov 03, 2016
  • If I had a Pound for every time I’ve seen an invoice issued to a UK company with two currencies, I’d have a whole lot of Euros. Seriously though, what is the right answer when you receive an invoice with two different amounts in two different currencies? How do you deal with this as a supplier? There are some relatively simple steps you can take to move forward.

    When a supplier’s good intentions go bad

    Very often European suppliers issue invoices with a Pound and Euro amount, with only one set of bank details. From their perspective, this makes complete sense as they are anticipating that a UK client might like to settle in their local currency. However, the supplier will have to factor in potential exchange rate fluctuations; thereby often grossly overestimating the GBP amount due.

    One cannot fault the supplier for this overestimation as they have no control over exactly when one of their clients will settle the invoice. Generally, they will issue an invoice with 30-day payment terms, in which case the exchange rate could move substantially. To make allowances for this, many suppliers will add 10-15% onto the Pound amount to protect themselves from this currency risk. Longer payment terms could result in an even higher overestimation.

    As a UK-based SME, what should you do?

    Quite simply, all you need to do is check. Most foreign exchange brokerages have an online portal with live client rates. This will enable you to see the achievable rate at the moment in time you wish to settle and not the unobtainable bank rate that you see beaming out the windows of a bureau de change.

    If you’ve signed up for such a service, simply log in and check which the most cost-effective method is.

    A case study

    A few weeks ago, I met a potential client while networking. She runs a bespoke interior design company in London and imports many of the products she uses from Italy and Germany. She has been in business for about three years now and has always settled the GBP amount as “it is the easiest” and she “didn’t know there was an alternative”.

    I did a retrospective price comparison for the preceding six weeks and on the €108,652.00 she had settled, she had paid £7,462.13 more than she needed to. This makes a substantial difference to her bottom line and she now uses our online portal to check and settle in the most cost-effective currency.

    Improve your bottom line, the easy way

    With the internationalisation of many of our businesses, it is very important to be mindful of instances in which we are exposed to currency risk. Simply empowering ourselves with information will mean that potentially crippling foreign exchange differentials become a thing of the past. With a flexible currency specialist on your side, your UK business can continue to thrive despite the weakening Pound.

    If you have any questions about corporate, or private, international money transfers send me an email, or give our team in the UK a call on +44 (0) 20 7759 7554.

    We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

    Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you’ll do so with the backing of experienced local experts.

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