Brexit isn’t making doing business across borders any easier, particularly if you trade with countries in the Eurozone. Changing taxation schemes continue to complicate matters. Here are five ways to make things easier.
Keep records in both currencies
Scrupulous recordkeeping is vital for any business. When you’re buying and selling across borders, it gets more important than ever.
You should consolidate transactions to a single currency (generally that of your home office or largest market) for accounting and reporting purposes. This is unavoidable, as you need working numbers to base business decisions on, but it’s problematic for two reasons. First, currency exchange rates fluctuate constantly, and converting a foreign currency sum to GBP fails to capture the impact of those fluctuations. Second, it runs the risk of obscuring or failing to capture the original currency amounts.
You should maintain records of the original transactions in a foreign currency for tax and duty purposes. You will mostly likely recalculate the exchange rate multiple times for different purposes, based on different business needs and tax codes. You might calculate the conversion within the first 24 hours for posting to your own internal reporting but only record an official exchange rate based on when funds actually move between markets and are received into your accounts in your home currency.
Be clear about your location(s)
Operating locations become important for international business transactions. Your location of record will have an impact on taxes, duty or import/export charges and other legal documentation.
When you expand overseas operations, it may be beneficial to have at least a nominal legal presence in another country, but do the research and be careful to report your locations consistently and accurately for legal purposes.
Know your borders
More specifically, know your trade agreements and import/export fees. International trade agreements influence which goods are subject to which fees when shipped between any two locations under the agreement. You should know source and designation locations, sector or type of good, and the applicable fees or taxes to be applied.
Miscalculating or ignoring these fees can have a significant impact on your profitability. This is particularly a challenge for retail sector companies with tight margins – keep up to date with trade agreements as they are renegotiated over time to avoid any unpleasant surprises.
Shop around for transfer services
You already know that currencies fluctuate on a regular basis. Particularly on larger transfers when buying real estate or stock, or selling wholesale, getting the best deal on exchange and transfer rates could result in significant savings.
Shop around for the best fees, and time your transfers to coincide with more favourable exchange rates. London money transfer companies offer a number of options for your currency transfers within convenient reach.
Hire a specialist
If your business isn’t at a size where hiring a specialist in international finance is feasible, and you’re not prepared to undertake specialist studies yourself, then consider working with an agency or independent legal and financial advisors to ensure that your transactions are correctly recorded and arranged to greatest benefit.
International business transactions introduce an added level of complexity to your finances. Keep meticulous records, and consider the legal and financial repercussions of official locations and imports/exports. Using a specialist advisor and shopping around for transfer services can protect you from costly mistakes.