The boom in connectivity over the past 20 years has a huge impact on how and where we do business.
International trade is a vital part of the UK economy, with exports of goods and services reaching over £600 billion annually.
Your international clients will undoubtedly prefer to use their own currency when interacting with your business. Being able to accommodate them and complete transactions smoothly, will benefit your business relationship.
It truly is a global marketplace, and this article will explain what you need to know about dealing with international currencies.
Sending and receiving funds
It’s not only international sellers that need to be enabled for multicurrency.
If your suppliers require payment in another currency, then your accounting software needs to be set up to accommodate foreign currency transactions.
If you only deal with 1 specific currency such as US Dollars, you may choose to open a bank account in USD. However, for people who deal in several currencies, platforms such as Wise allow you to easily transfer funds around the globe.
Be sure to shop around to find the solution that suits you best.
Recording transactions accurately
It’s vitally important your accounts reflect the payments coming in and out accurately.
As the exchange rate is fluid, the Euros you send on Friday could be worth a different amount on Monday.
Accurately recording international currency is a complex process. On the date of the transaction, the international payment must be converted into GBP based on the exchange rate at the time the transaction occurs.
If the exchange rate fluctuates and you receive less or more GBP that initially expected, this must be treated as foreign currency loss or gain in the accounts.
Cloud accounting software such as Xero and FreeAgent have multicurrency functionality that manage the exchange rate and convert international currency into local currency for you.
Do your research
International trade isn’t just about ensuring you can send and receive funds. Each country has rules around import and export that you must abide by to continue trading there.
The EU has particularly strict import and export rules post-Brexit, which has dramatically slowed trade with our European neighbours.
Top Tips
- Understand the specific import and export rules of each country before you start trading with them. Gov.uk [https://www.gov.uk/check-how-to-import-export] has a wealth of information on international trade
- Open an account that can send and receive the funds
- Check your accounting software can handle multiple currency transactions to ensure your accounts stay accurate
- Get help if you are unsure. Gov.uk [https://www.gov.uk/government/organisations/hm-revenue-customs/contact/customs-international-trade-and-excise-enquiries] has a dedicated import and export enquiries line.
Now you know how to manage international currencies, the world is your oyster!
It’s time to grow your business network globally. To see how we can help, get in touch here or call: 0808 281 0303.