Is Billing Foreign Customers In Their Local Currency Better?

Canadian exporters can sharpen their competitive edge in the global marketplace by invoicing invoicing foreign companies in their local currencies. 

Today, customers expect businesses to cater to their needs, and this includes the option to conduct transactions in their local currency. Whether you’re dealing with clients at home or abroad, meeting the expectations of invoicing overseas customers in their own currency is key to building strong, long-lasting relationships.

International invoicing in local currencies not only simplifies the buying process for your international clients but also makes your business more appealing to them. It removes the hassle of foreign exchange conversion, helps them avoid unfavourable exchange rates, and creates a smoother overall experience. Offering the convenience of making international bill payments in their own currency can set your business apart from competitors and foster stronger connections with global customers, leading to greater loyalty and future business opportunities.

Three reasons for invoicing foreign companies in their currency

Here are the top reasons and benefits of quoting your international customers in their local currency.

International invoicing creates a positive impact on sales

When working with international clients, determining which currency they prefer is essential. Generally, people prefer transactions in a familiar currency, usually their home currency. Hence, if you have always billed in the currency you wish to receive without regard for clients, it may be time to rethink this practice and consider multi-currency invoicing.

Invoicing overseas customers in local currencies puts their needs first. It's crucial to growing sustainable customer relationships and opening up revenue opportunities. Your international customers are more likely to understand your offers, making ordering easy. Also, cross-border invoicing customers using terms they know ensures they make a more informed decision. It's all part of improving the customer experience, positively impacting sales.

Become more competitive in foreign markets with cross-border invoicing

One of the keys to successful global expansion is providing flexible payment methods that are preferred by your customers, including the option to make international bill payments in their local currency. On the other hand, forcing your customers to accept the currency risk by invoicing in your currency can make your business less appealing.  

Remember, most global customers are spoilt for choice. If you ignore multi-currency invoicing, they'll turn to local suppliers or more considerate international businesses to eliminate the risk of currency conversions. Therefore, walking in your customers' shoes and meeting them halfway is imperative. Allowing international customers to pay in their local currency can significantly benefit your competitive edge. The key is to balance this with a comprehensive foreign exchange risk strategy.

More control over business operations through foreign currency billing

Not invoicing in local currency can confuse the actual cost of your products or services. Additionally, when you ask customers to absorb currency conversion costs, they expect you to lower your prices so that the overall costs remain reasonable. When you implement international invoicing, your customers no longer have to deal with foreign exchange risk, and the negotiating advantage becomes yours. This is an excellent opportunity to improve your profit margins because you make life easier for your international customers.

You also have more control over the efficiency of your cross-border payments. For example, if you're importing and exporting goods from the same country, you can use the foreign receivables to pay suppliers. This eliminates the foreign exchange risk, which is a win-win.

What about the FX risk when invoicing foreign companies in local currencies?

While it's true that invoicing foreign companies in their local currency is preferable, it also leaves you vulnerable to fluctuations in exchange rates. By eliminating this concern for your customers, you have assumed the currency risk yourself and any associated costs. This seems like a surefire way to watch your profit margins plummet, but wait…

You can use currency risk management tools to hedge against the volatility of the FX market. For instance, when you're receiving international bill payments through a currency specialist like MTFX, you can mitigate the risk in the following ways:

Use forward contracts to secure favourable exchange rates

Forward contracts can be invaluable when buying a specific currency for a future exchange. By locking in your desired exchange rate now, you can protect yourself from potential currency fluctuations before your scheduled payments are due. This approach provides peace of mind, ensuring your costs remain predictable, regardless of market fluctuations.

Leverage market orders for targeted rate execution

Market orders provide a strategic approach to achieving your preferred exchange rate while mitigating market risk exposure. With this approach, you can set a target exchange rate, and the transaction will be automatically executed once the market reaches that rate. This method helps you capitalize on favourable movements in the currency markets while setting parameters to minimize downside risk, ensuring you’re not exposed to unfavourable shifts.

Open a multi-currency account for simplified foreign transactions

Managing international transactions and multi-currency invoicing can be complicated. A multi-currency account streamlines this process by allowing you to receive and hold international payments in various currencies without the need to open and manage multiple foreign bank accounts. This setup offers greater control over incoming funds, reducing currency conversion, transfer hassle, and administrative burden.

Use a live currency rate calculator for accurate exchange rates

Before making any currency transfers, it is crucial to know the current exchange rates. A live currency rate calculator provides real-time exchange rate information, allowing you to check the rate before invoicing overseas customers in their own currency. This ensures that you’re getting the most accurate and up-to-date rate possible, helping you make informed decisions and optimize the value of your transactions.

The easy way to accept international bill payments with MTFX

Invoicing in foreign currencies is simple. If you use the right international payments specialist and leverage a currency chart effectively, you can streamline your process. With MTFX, you don't need multiple foreign-denominated accounts to start foreign currency billing for international customers. Instead, you only need five minutes to register your account, complete with a full suite of global payment solutions, including multi-currency capabilities. That means your business can offer customers the chance to pay in the currency they have.

With MTFX, you don't have to pay over the odds because our exchange rates are 3-5% more competitive than your bank, and our low transfer fees help you save on exchange rate margins. Your MTFX business account also comes with access to risk management tools and dedicated currency specialists to maximize the value of your foreign receivables.

Register your account with MTFX today to enable your customers to pay in local currencies and to receive funds quickly.

FAQs

1. Is it better to bill international clients in their local or my home currency?

Invoicing foreign companies and clients in their local currency can lead to smoother transactions and a better customer experience. However, it depends on exchange rates, payment processing fees, and both parties' preferences.

2. What are the benefits of invoicing overseas customers in their local currency?

Invoicing overseas customers in their local currency can make it easier for them to understand the cost, avoid unexpected exchange rate fluctuations, and streamline the payment process, making them more likely to pay promptly.

3. Are there any drawbacks to international invoicing in their local currency?

The primary drawback is that you may incur currency conversion fees when receiving international bill payments in a foreign currency. Additionally, fluctuating exchange rates could impact your revenue if the currency value changes unfavourably.

4. How do I decide whether to invoice in my home or foreign currency?

When deciding how to bill international clients, consider your foreign customers' preferences, the stability of the foreign currency, and any associated fees. Discussing options with your clients is often a good idea to see what works best for both sides.

5. Does billing in a foreign currency affect payment timelines?

Billing in a foreign currency can sometimes lead to faster payments, as customers may find settling invoices in their local currency easier. However, if there are delays in currency conversion, it could extend the payment timeline.

6. What should I remember when paying invoices in a foreign currency?

When paying invoices in a foreign currency, watch out for currency conversion fees and exchange rates. Using a reliable payment platform that offers competitive rates and minimizes additional charges is also helpful.

7. How can I simplify the billing process when dealing with foreign customers?

Consider using billing software that supports multiple currencies to make invoicing international clients easier. This will help automate the process, reduce errors, and ensure that your foreign customers receive clear and accurate invoices.

8. Are there legal considerations when invoicing in a foreign currency?

Yes, there may be legal considerations depending on the countries involved. It's essential to comply with local tax regulations, documentation requirements, and any currency restrictions that could affect your ability to invoice and receive payments.

9. How do I handle exchange rate fluctuations when dealing with foreign clients?

To manage exchange rate fluctuations, you might consider using forward contracts to lock in a favourable rate in advance or setting a buffer in your pricing to account for potential changes in currency value.

10. What are the best practices for billing international clients?

The best practices for billing international clients include communicating payment terms, choosing the correct currency for invoicing, and using secure, reliable payment methods. Discussing their preferred invoicing method with your clients is also a good idea to ensure a smooth transaction process.

Register your account with MTFX today to enable your customers to pay in local currencies and to receive funds quickly.