When invoicing foreign customers in foreign currency, the currency risk is transferred to the U.S. dollars for deposit to your checking or savings account.” Upon receipt of the foreign denominated wire your bank can convert the foreign currency to U.S. “International payments are easily made via the SWIFT network. “A foreign customer or partner can send the foreign currency denominated payment to your bank, your bank can provide the wire transfer instructions to you,” Henehan explains. Payments can be converted by your bank when they are received and if currency risk is a consideration, your bank can help you address that risk very easily. Is it hard to price goods in a foreign currency?Ī common misconception is that a foreign denominated account is necessary if you will be receiving payment in foreign currency, this isn’t necessary. To the extent the receivables equal the payment need, the company has eliminated their exposure to the value of that currency, which is a natural hedge.” “The company has foreign receivables in a currency that match their payable needs. “Companies that export and import goods from the same foreign country can create efficiency when the cost of imports and exports is in the same currency,” Henehan notes. Foreign denominated receivables can fund foreign payable needs, creating a natural hedge.Helping to protect foreign customers from market volatility.Becoming more competitive in global markets.Invoicing customers in their local currency has many benefits, including: exporters can combat these issues by considering pricing their products or services in foreign currency over U.S. dollar which has risen to its highest level in 20 years. These factors have contributed to a sharp rise in the U.S. The global trade environment continues to be impacted by many factors, pandemic concerns, inflationary impacts and global interest rate increases. Yet the downside of shifting the foreign currency risk to customers in a volatile market could create a negative impact on sales. Changing time-honored business practices may seem difficult. The accounting may seem easier and more straightforward. It’s not hard to understand why many companies price their exports in USD. Why invoice foreign customers in their own currency? exporter will need to consider how this impacts future sales and how they’ll remain competitive.” “Since this recent move increased the purchase of $1 million USD by approximately 29,000 CAD, a U.S. company invoicing its Canadian customers in USD has shifted the foreign currency risk to their customers,” explains Mary Henehan, managing director & co-head of Foreign Exchange Sales at U.S. products more expensive to Canadian companies. “Recently, the Canadian dollar (CAD) weakened by 2.9% against USD in a one-month period, making U.S. dollar (USD) rises, that actually makes U.S. There is a currency conversion in nearly every international payment, making the currency used when invoicing foreign customers or paying a foreign supplier an important consideration. dollars.Ĭonducting business across borders has many considerations for both exporters and importers. exporters can become more competitive in foreign markets by pricing their products or services in foreign currency over U.S. Find a financial advisor or wealth specialist.
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