When working with customers or suppliers in other countries, it’s important to remember that they may use a different currency. There could be added costs involved, plus you have the exchange rate to consider. This post offers a few tips for how to deal with different currencies.
Charge customers in their own currency
It’s usually better to charge customers in their own currency. In other words, if you’re a US business and you’re dealing with a customer in Germany, you should charge them in Euros rather than US dollars. Customers may be put off if you ask them to pay in your currency – not only does it require them to calculate the exchange rate, but they also then have to pay any exchange fees. While charging customers in your currency can be cheaper and more convenient for you, you’re better off putting the customer’s needs first if you want to win them over.
Adjust your pricing automatically
Many eCommerce platforms have tools that allow you to automatically convert pricing. Not only that, but this pricing can automatically adjust itself based on the exchange rate. This can prevent you from overcharging or undercharging a customer if the value of their currency falls or rises.
Know when to lock in an exchange rate
It can be worth locking in exchange rates – particular when paying or receiving ongoing payments. If a foreign currency sharply rises or plummets in value, this can ensure that you still pay or receive the same amount as was originally agreed. This exchange rate is typically locked in on the day you sign a contract.
Set up multi-currency accounts
If you’re receiving payments in foreign currencies, you’ll need to set up a multi-currency account. This allows you to hold money in different currencies and exchange it in your own time. Such accounts may only allow you to hold certain currencies or a certain amount of currencies – make sure to look into this when choosing such an account.
Factor exchange fees into your profits
You’ll have to pay money to exchange foreign currencies. It’s important to budget for these exchange fees so that your profits aren’t affected. Factor these fees into your pricing and shop around for the cheapest exchange fees.
Consider trading in crypto
Many companies are starting to use cryptocurrency for foreign transactions. Such currencies can perform as a neutral currency, which can reduce the need for exchange fees. Consider looking into crypto banking and setting up a crypto account. Bear in mind that some cryptocurrencies can be volatile.
Know when to change suppliers
When taking on suppliers in other countries, keep an eye on the exchange rate. If the value of their currency is going up, you may find that they start steadily charging more – particularly if they’re asking you to pay in their currency. In such cases, you may want to consider finding a supplier in another country or in your own country so that you don’t have to pay as much.