http://www.inttradefinsolns.co.uk

More next month.

Buy now, buy later, or do nothing until you have to, and hope.  These are the usual choices importers face when it comes to paying for goods invoiced in a foreign currency.  For exporters, it’s usually sell in Sterling only or use a foreign currency and then do what with the proceeds?  Much is dependent upon your business, volumes, values, etc. and it really needs a

case by case approach.  The ‘Do nothing until you have to’ option can, in some cases, be the right thing to do.  What’s vital, though, is that you are taking the decision with some valid background knowledge and information as opposed to just guessing.

Even for modest sums [£2,000+], it is possible to structure your foreign exchange needs so that it benefits, not hinders you.  If you export, one option to consider is to open a currency account and use this to collect individual sales before converting in bulk to Sterling.  Make sure you change your invoice details, though as your bank will automatically credit whatever account is on the instruction, even if this involves a currency conversion.  You will almost certainly not earn any interest on the currency, but you should see a better exchange rate, giving you more Sterling.  Importers can also make use of a currency account to ‘bulk convert’ funds and then pay out individual sums.  However, be careful, sometimes it will be more cost effective to make separate Foreign Exchange deals and payments.  Do your homework first!

“Whenever you trade overseas – be it buying or selling – or even, if you’re one of the growing number who trade purely within the UK but do not use Sterling as a settlement currency, don’t overlook the need for a suitable foreign exchange strategy as part of your overall plan.  Many businesses were caught out at the end of last year when the Pound went into freefall against the US Dollar and euro.  Those importing found that their profit margin was eliminated, and more, in some cases by the rate movements.

As a result, many small businesses failed – and this without all of the other issues that are currently around.  Being aware of the risks and knowing what options are available to you before you sign deals will help you overcome many of these problems and allow you to crystallise your profit margin, either in whole or part.  There’s no one, simple formula; every business will have slightly differing issues to address, but, if you are uncertain of your choices, then seek outside help sooner, rather than later.”