By working with a global invoicing service, the firm redesigned their processes so that all customer invoices were generated from their headquarters in the UK, while customers were able to pay their invoice into a local subsidiary bank account.Īt the close of each business day, all customer payments are uploaded into the global firm’s main account in the UK. Objective: Manage and reduce currency risk and administrative costs, improve cash flow reportingĪn international freight forwarding operation with a worldwide customer base needed to centralise their invoicing and payments operation, invoice customers in the local currency, and receive payments back in the company’s home currency. After this saving, requested Clogs4U to always send its invoices in Euros.īusiness Issue: Invoicing globally from one location Clogs4U worked with a specialist currency broker to settle this invoice in Euros at the rate of 1.08 costing it only $2.16m, a saving of $40,000. requested Clogs4U to resend the invoice in Euros. Therefore when Clogs4U receives the $2.2m, it actually pockets €2,037,038 - €37,038 more than its price tag. The 1.1 rate is the rate Clogs4U says its bank charges, but Clogs4U actually has access to a currency broker providing it 1.08. On the latest invoice for €2m, Clogs4U sent an invoice for $2.2m citing an exchange rate of 1.1 CAD to EUR. On the invoices, Clogs4U shows a Euro to Canadian dollar rate of 1.1. , a Canadian website operating in Canadian dollars, buys all its shoes from Clogs4U in the Netherlands, where the shoes are priced in Euros.Ĭlogs4U has always invoiced in Canadian dollars ($), even though its products are priced in Euros (€). Objective: Reduce effective purchase price by having the supplier invoice in their own currency Case Study 1īusiness Issue: Foreign supplier invoicing in the buyer’s home currency This hidden margin can be removed if both parties transact in the same currency. For example, a company might use a published bank rate whilst actually using a more competitive currency broker. It is also a regrettably known practice for some suppliers to claim an inferior exchange rate on invoices to foreign customers than the one they actually pay. Use our exchange rate tool to perform a search and see what your exchange rate should be. This shifts the exposure to the vendor, but can considerably improve the process for the customer. Alternatively, the customer could be invoiced in their own currency. This may be preferable to the customer if they have revenue in the same currency, but this will not always be the case. Use our new Business Payments Tool to receive a free currency audit and find a foreign currency invoicing provider.īy invoicing the customer in a company’s home currency, a company forces the customer to assume currency risk and any associated costs. Failure to do so can materially affect the margin on any foreign sale, or price of any foreign purchase. Greater administrative costs must be managed, and there is a need to identify and mitigate the potential for variable revenue and costs caused by exchange rate fluctuations. How to Manage Foreign Currency Invoicing to Help Raise Marginsįoreign currency exposure is an unavoidable issue for any companies dealing with international clients.
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