With the Internet making the world a smaller and smaller place and online transactions becoming increasingly straightforward, growing businesses keep looking for new ways to appeal to a global market. One of the most obvious ways to do this is to allow clients and customers to pay in their own currency, and facilitators like PayPal are helping businesses to do this.
In bookkeeping, however, it’s important for UK businesses to record all their transactions in sterling. This is what HMRC wants to see, and is also what you’ll need to use when putting your balance sheet together.
If you have overseas clients and customers and want to broaden the range of currencies you accept, here are three important pieces of advice:
1. Become familiar with exchange rates
One thing that recent years have brought home is that currencies can fluctuate in strength. In 2007, the first signs of an imminent crunch were when the U.S. dollar became noticeably weak. This was followed by struggles with the Euro, and even nations like Iceland having serious economic situations.
This should act as a reminder to consistently monitor the wellbeing of the currencies in which you trade. Remember that, for bookkeeping purposes, you will need to convert transactions into sterling using the exchange rate applicable on the day the sale took place. If you invoice overseas clients, this is particularly important, as it’s easy to make the mistake of applying a rate on the date of invoicing.
2. Chase payments swiftly
The fluctuating nature of exchange rates makes it especially important to ensure punctual payment when made in a foreign currency.
Businesses that allow for sluggish overseas payment may find that they struggle to keep accurate books or lose money on rates. We advise people to prioritise chasing payments in other currencies to avoid such issues.
3. Consult an expert
If you are considering broadening your currency horizons, bear in mind that there are specialists in this field who can help you make the process a smooth and well-informed one.
With outsourced accountancy, business owners can see much of the burden of tackling non-sterling transactions taken off their shoulders and placed into the hands of professionals. This, in turn, will allow them to focus their efforts more heavily on building an overseas base of clients and customers, safe in the knowledge that HMRC will be kept happy as you bring in the profit from across the borders.