Now more than ever, technological advancements have turned the world into a global village where you can trade and communicate with clients anywhere. If you’re a business owner, then there’s a chance you’ve considered going international and having global customers.
In this instance, invoicing and receiving payments in different currencies at little to no mark-up fees is critical to your business. You’ll have to handle and provide services in different currencies to satisfy customer needs when selling products and services globally. That said, it’d be best to have a multi-currency account for your business when trading globally.
Every country has a currency significantly different from another in terms of value. From a business perspective, you could be getting materials from a foreign country and selling the final products in another region, hence the need to understand the currency value differences.
While it might be challenging to calculate the currency exchange when making and receiving payments, a multi-currency account helps you avoid conversions and associated fees. Though the concept of using a multi-currency account for business can be daunting, here’s a guide on how it works:
Understand what a multi-currency account is
You can classify a multi-currency account as a bank account where you can receive money, make global payments, and possess different currencies. The significant element in a multi-currency business account is that your details, such as name, account number, and swift code, are the same despite the different currencies. It’s like having a central account with smaller accounts for several currencies.
To get started with a multi-currency account for business, create one with a trusted banking service. If you aren’t sure how to do it, consult a banking agent or representative. The account can have a wide variety of currencies, such as the United States dollar (USD), Euro (EUR), and the British Sterling Pound (GBP), among others.
While there are other international payment options, such as wire transfers, you’ll realise that a multi-currency account is more convenient. In most cases, you’ll get a mark-up charge and an exchange rate fee if the currency is different when transacting internationally using a bank wire.
In addition, wire transfers can take some time before they’re approved, which can be detrimental to a business. The mark-up fees can also be costly for a business with significant volumes of international transactions.
With a multi-currency account, there’ll typically be no exchange rate fees because you can make and receive payments in that specific currency. For instance, if you’re getting supplies from China, you can make payments in Chinese Yuan (CNH) without having to make any conversions.
A multi-currency account can be very beneficial to your business. One of the benefits that your business will be getting is competitive exchange rates since there’ll be little or no mark-up fees. If you must make a currency conversion, you’ll use the foreign exchange market, where the mark-up rate is lower than in a conventional bank.
Besides, you can use the multi-currency business account anywhere, including travelling. Some banking companies that offer multi-currency accounts allow you to install their application on your phone or take a visa debit card. Using the account anytime and anywhere gives you convenience, and your business can’t be affected because you’re travelling.
Reconciling business accounts
The idea of having money in different currencies and sub-accounts can be an accounting nightmare for a business. You might be worried that conducting business in multiple currencies would cause discrepancies where invoicing is in one currency and payments in another.
Further, accounting for mark-up fees incurred in currency conversion can be a headache. However, you shouldn’t be worried about such discrepancies because invoicing and payments can be made in the same currency using a multi-currency account.
Nonetheless, you can consult an accountant to help with financial statement reports if you’re not confident working on them yourself. Moreover, converting currencies to local currency isn’t necessary when making a financial statement report. You can use data from your invoicing and payment records in the same currency format.
Navigating currency fluctuations
Changes in the economy or political instability can affect the currency’s value, especially when it experiences fluctuations. As a business owner trading globally, you’ll be affected when making currency conversions, sometimes having to pay more because of currencies plummeting.
However, if you’re using a multi-currency account, you can mitigate the impacts of currency fluctuations by only making conversions when it favors you. For illustration, if the GBP fluctuates compared to the USD, you can’t be affected because you’ll be exchanging in GBP and not converting the currency to USD.
Ideally, the multi-currency account for business can cushion your business from instability in foreign exchange rates. Further, once you’ve understood how the currency market works, you’ll make beneficial conversions for your business.
The introduction of multi-currency accounts for businesses makes it easy for you to hold, send, and receive money in different currencies. The convenience of trading in multiple currencies for a business is that you can avoid mark-up fees and currency fluctuations when making conversions because you have several accounts to designate each financial transaction.
The multi-currency account for business is fairly easy to use because it’s similar to a bank account. You should also ensure that you’re using a service provider that can protect your data and that of your customers from a breach. If you’re trying to take your business internationally, you should try a multi-currency account from a reliable service provider to ensure the security of your financial transactions.
- This information is of a general nature only and should not be regarded as specific to any particular situation. Readers are encouraged to seek appropriate professional advice based on their personal circumstances.