Should I have multi-currency bank accounts?
Some businesses that make a lot of overseas sales will set up a bank account in a foreign currency so that they can easily send and receive cash in that currency. This can be costly, though, and it can be hard to transfer money between your bank accounts if one is in sterling and the other is in a different currency.
Also, bear in mind that many accounting packages cannot cope with bank accounts in multiple currencies and you may find yourself having to manually translate every entry into sterling.
Some accounting packages, such as Sage 50, do offer multi-currency banking but only on their top-of-the-range product, so you could find yourself paying over the odds for a package with a lot of other features you don’t need and struggling to learn how to use it.
Real-life example: Linda the bookkeeper
One business I knew had a bookkeeper called Linda, who was quite happy using a simple bookkeeping system, but very confused by the complexities of Sage 50’s top-of-the-range package. However, seeing as her employer had set up a bank account in US dollars, she had no choice but to learn to use that package because most of the simpler packages don’t handle multi-currency banking.
What other payment options are there?
There are other systems, such as PayPal, which allow you to accept payment in multiple currencies without having to set up a new bank account.
PayPal can then translate all your money into sterling as you receive it, no matter what foreign currency your customers actually paid you in. They do charge a fee for this service (see below).
Some banks will also collect cheques from international customers for you.
If you’re taking payment by cheque or bank transfer from customers overseas, it can take longer and cost more for the money to arrive in your account than from your UK customers, so do plan your cash flow carefully.
It could also be more difficult to chase customers who pay slowly or not at all, because it may not be practical for you to go and visit them yourself to collect the payment. And if you don’t have a good command of local language and law then it could be hard to send debt collection agencies or solicitors to visit.
Want to learn more? You can thanks to Open to Export here: http://opentoexport.com/article/taking-and-making-payments-in-foreign-currencies/