The final extract from “Minimising Trading Risks Abroad”, the newsletter published by Ray Stannard of International Trade Financial Solutions
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!