Currency Exchange |
07:45am May 10, 2004 PST (#1 of 6)
Have any of you had to deal with a foreign client? We've just acquired our first and are in the process of setting up systems in place for them. My main concern is billing and payments and how the currency exchange rate plays a part in this.
If any of you have had this experience, I'd welcome your opinions and/or suggestions.
Thank you in advance for your help!
Brenda Rodriguez Creative Link Studio
07:45am May 10, 2004 PST (#2 of 6)
Yes, and we gave them quote in US dollars, half payment due upon signing of contract, then 1/4 each during the process until completion. Direct deposit only to your bank account. If they're serious, they'll pay for it, otherwise you know.
LIESNA MAURONE > administrative director -------------------------------- CRITT GRAHAM
07:46am May 10, 2004 PST (#3 of 6)
Hi Brenda,
We have a few foreign clients. Normally, we issue our invoices in Canadian Dollars (we are in Toronto). For our foreign clients we add a note on the invoice saying "If paid in ___ currency, please pay ______"
What this does is give us the control over what they should pay, should they choose to pay in their currency. For conversion, we call our bank to ask the rate and add certain percentage to the conversion rate to hedge against currency fluctuations.
It has worked well for us for years and it gives an added convenience to the client.
Johnson J. Paul Controller Campbell Michener & Lee Incorporated
07:52am May 10, 2004 PST (#4 of 6)
We are an international company. We always deal in US currency even with foreign clients. US dollars are universal so there should be no problem with billing and receiving in US funds. Of course, this depends on the client and the country in which the client is doing business.
Wendy
07:52am May 10, 2004 PST (#5 of 6)
We have clients in England and Germany. We have set up payments through wire transfer - the banks worry about the exchange rate and we are paid in US funds. Our bank charges us $10 a payment, but it is worth it.
Diane Smith Business Manager Donaldson Makoski Inc.
07:53am May 10, 2004 PST (#6 of 6)
If at all possible, I would suggest that your agreement with them specify something like "all billings and collections to be in US dollars". This would not be uncommon, and I would think that foreign companies used to working with US companies would have procedures in place for this. Otherwise you are taking on the currency translation risk. For instance, say the other currency is worth 50 cents ($1 =3D 2 "thems"). You do $10,000 of work and bill 20,000 "thems". The "them" collapses to 5 to the dollar. You're going to get $4,000 for your work eventually.
Your attorney or bank might be able to supply you with a standard legal phrase used by other companies doing business with foreign clients.
You probably want to arrange for payment via wire transfer. You'll be charged $25 or so by your bank but it's easier than cashing foreign checks and waiting 2 weeks for the funds to be available.
If you can't arrange for payment is US$, and the amount is material to the agency, for heaven's sake look into currency hedging to eliminate the risk. On a very basic level, you could either buy a put for "thems" in an amount equal to your receivable at the time you bill (giving you the right to unload "thems" at the contract rate when you receive them -- you would take a haircut for the cost of the contract) or just sell off the receivable entirely when billed (you would get full amount less the purchaser's carrying cost and evaluation of currency risk.) Talk to someone who's a professional in this area about the options.
If you're dealing with a "friendly" country with a low rate risk you may feel this is unnecessary, but at least go into the risk with your eyes open-- even stable, major currencies can move a few percent pretty quickly.
As to the mechanics -- I could come up with a couple of options, but let's see if someone who has dealt with this before has a good system.
Brent A. Byrd
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