In today’s world, everything is global. From news, to our relationships, to the customers we do business with. In order to be successful with any business, large or small, you must be prepared to operate on a global scale and this means working with multiple currencies. While it can be difficult to have multiple currencies flowing through your business, it is vital for success.
If you’re looking at working with multiple currencies, take a look at the following 5 tips.
Lock in Your Rate
Often, small businesses do not have a great deal of cash flow to regularly handle the changing exchange rates. There is always the potential for an exchange rate loss. It is possible though to purchase a contract where you are guaranteed a regular exchange rate. Businesses are able to buy what is called a “forward contract“. This can be purchased either from the bank or another money specialist, and the exchange rate is agreed for a set period of time. While you will have to pay a commission on this contract, it’s guaranteed that you won’t lose money on the exchange.
Do Not Gamble
For small businesses trying to increase their cash flow, it can be quite tempting to try to “beat the house” and exchange one currency for another in order to turn a profit. While yes, this is an entirely possible scenario, it can also be extremely dangerous. Many small business owners can see this as an opportunity but in reality, it is a great way to get burned. Try to avoid the temptation to turn into a high roller at the casino with exchange rates.
Streamline the Process
Using cloud based software to help streamline the process can improve communication, speed, and efficiency within your small business, especially when working with different currencies. Consider using a software program to help manage transactions, such as SEPA. This entirely cloud based platform allows for a single access point with centralised Direct Debit Management which can allow your business to reach further into the European market.
The process is simple and fast and transactions are often completed in a single day. SEPA is able to make cross-border transactions as simple as domestic transactions by quickly converting BBAN numbers to both IBAN and BIC numbers.
Consider allowing your customers to work in their local currency. This can greatly reduce the stress and headache experienced by your customers and can increase overall satisfaction. While it may seem easier to allow your customers to worry about exchange rates and conversions, it ultimately pushes the chore of conversion on to them. If your customers are easily allowed to see pricing in their native currency, chances of a sale increase and that they are more likely to purchase your product from your small business because the ease of purchase is that much higher. Your small business should do the hard work so that your customer does not need to.
Accounting, Accounting, Accounting
When maintaining the books for your small business, you know that accurate and detailed accounting records are key. This is even more true when working with multiple countries and therefore, currencies. Regardless of where the transaction occurred, any record of the purchase must be recorded as money gained measured in pounds sterling. The conversion to pounds sterling is calculated based on what is described as, “the exchange rate in operation on the date on which the transaction occurred.”
While some currencies do not have a wide fluctuation of rates, other exchange rates between currencies can. It is vital to your small business’ success to keep detailed and accurate accounts to ensure that your earnings and losses are recorded at the correct exchange rates on the correct dates.
It can be challenging to work with several different currencies, but it can also be very rewarding. To be successful in today’s work, you must be able to expand your reach and influence and thus, accept currencies other than your native currency to increase market share.
Luckily, with these few tips and with helpful advanced software like SEPA, we are able to make the process easy to understand and profitable to work with.