FX - Multi Currency

July 10, 2018

 

If you have overseas operations outside of the US you will unavoidably run into the need for fx transactions.

 

Most US companies continue to bill their European based customers in US$ for some time after they’ve set up in Europe. The particular problem is that you will inevitably see a longer AR on those transactions and those customers have the headache of making an overseas payment not in their normal functional currency. Most European banks rather quaintly still do not have online facilities for making payments outside of the currency used in that jurisdiction. It’s far better from an aged debt context to bill a customer in their currency, don’t make it hard for your customer to pay you. Having customers pay in their own currency offers a natural hedge for any operational costs you might have in that currency avoiding unnecessary fx costs.

 

Commonly a US company will fund an overseas entity once or twice a month based on the cashflow requirements of that entity, a difficult juggling act predicting the balance between payroll, supplier payments and any customer receipts. US banks seem typically to charge more competitive fx rates versus UK and European banks, this is not always the case but happens often enough to be demonstrably true.

 

The best practical solution is to use a multi currency ‘bank account’, a relatively recent innovation that we’ve not yet seen a traditional mainstream bank offer, probably because those banks make more profits continuing doing fx as they have, but there a number of brokerages now that offer the multi-currency platform. Payments in to such accounts can be pooled if required into one currency for operational ease and the rates are that much more competitive than the traditional banks seemingly offer.

Please reload

Featured Posts

Google vs HMRC

February 17, 2016

1/3
Please reload

Recent Posts

February 14, 2019

December 6, 2018

November 12, 2018

September 21, 2018

July 10, 2018

Please reload

Archive
Please reload

Search By Tags
Please reload

Follow Us
  • Facebook Basic Square
  • Twitter Basic Square
  • Google+ Social Icon

© 2020 Virtual Subsidiary Group.

UK: +44 (0) 1753 218 400
info@v-sub.com
817734_linkedin_512x512.png
square-twitter-256.png