Exchange rates and moving money

Managing exchange rates when exporting

View transcript for Episode 14 - Manage exchange rates recording
It’s important to understand how exchange rates can impact your business, particularly when considering how much to charge.

Exchange rates can change daily. You should keep a close eye on rates in your chosen market and research any factors that could influence them, to avoid losing money.

Consider your invoicing currency

You should think about whether you’ll charge for your goods or services in pounds or another currency agreed with your buyer. They will of course have an interest in this decision too, wanting the best deal for them. So be prepared to negotiate. Dollars and euros are common choices. Invoicing in pounds may be the option with least risk, but consider your buyer's situation.

Invoicing in a foreign currency

Sometimes invoicing in a buyer's currency could help you win orders. And in certain markets, it may be expected. So be prepared for your invoice value to rise or fall depending on the exchange rate.

Reducing risk

If you invoice in another currency there are things you can do to reduce risk.  These could include agreeing to setting the exchange rate on the day of payment. Charging extra to cover the cost of the currency exchange. Getting paid into a foreign currency account. Negotiating payment terms over shorter periods, because the longer you wait for payment, the greater the risk of currency fluctuation.

Think about how pricing and its relationship to exchange rates may impact you in the longer term. If import prices rise in your target market and your business keeps its prices constant, that may help to grow your market share.

Remember you can speak to your bank or a specialist exchange rate service for tailored advice.

What you’ll learn

  • how exchange rates can affect your exporting
  • how you might manage risks related to currency and exchange rates
  • how you'll make decisions about which currency to price in

  1. Understand what an exchange rate is and be prepared

    An exchange rate is the value of a country's currency in terms of the currency of another country or economic zone. Typically, these rates of foreign exchange (known as FX) change daily, and if you haven’t fixed your exchange rate, you haven’t fixed your price. Use the internet regularly to keep track of exchange rates and factors which influence them in your target markets.

  2. Consider your invoicing currency

    Think about whether you’ll charge for your goods in pounds or another currency agreed with your buyer - the most common will be US dollars or euros.  Your customers will also be interested in getting the best terms on their purchases, so you should be prepared to negotiate.

  3. In general, negotiate to invoice in pounds

    For most UK companies, this is the best, most risk-free option.

    This is especially relevant in countries with more volatile currencies, such as some South American markets.

    But be aware your buyer may not want to take on the risk, or in some markets the increased bureaucracy, of paying in another currency. In markets such as Japan or Switzerland, for example, this might make you less competitive than someone invoicing in the buyer’s local currency.

  4. Invoice in a foreign currency if you can’t invoice in pounds

    Invoicing in the buyer’s currency could help you win orders. In some markets, such as the United States, you might find it's expected. But you’ll also be exposed to a greater risk of currency fluctuation, with your invoice value rising or falling depending on the exchange rate on the day it is paid.

  5. Offset risk if you’re invoicing in another currency

    You can reduce financial risk by:

    • setting the exchange rate on the day of payment
    • charging extra to cover any possible losses and the cost of currency exchange
    • getting paid into a foreign currency account
    • negotiating payment terms over shorter periods - the longer you wait for payment, the greater the risk of currency changes
  6. Think longer term

    Think about pricing and its relationship to currency exchange in the longer term. Exchange rates can cause import prices to rise in your target market, but if your business keeps its prices constant, that may help to grow your market share. If you decide to raise your prices, you may be able to compensate by offering better terms or higher levels of service.

  7. Get expert help

    You can speak to your bank or a provider of specialist exchange rate services for tailored advice on your exchange rate strategy. Some specialist services can work with you to transfer money from local currencies, euros or dollars when the exchange rate is favourable for you.

It's always best to get paid upfront, in your own currency. But if that's not possible, there are other ways to avoid losing out. A way to factor in extra costs is to calculate the average fluctuation of a market's currency over a year, as a percentage. You can then apply this to your prices.

International trade adviser

Share this page

  • Email
  • Facebook
  • X

Accelerate your learning

Sign up to Great.gov.uk and you'll be able to:

  • track your learning progress and read case studies
  • join live events from the UK Export Academy
  • compare markets using live export data
Sign up to get started

Already signed up? Sign in

Something went wrong. Please try again.

Was this page useful?

Thanks for letting us know

Can you tell us why this page was useful?

Do not share any personal or commercially sensitive information.

Cancel

Thanks for letting us know

Can you tell us more about your feedback?

Do not share any personal or commercially sensitive information.

Cancel

Thanks for your feedback