Many agencies are looking to do more international business to mitigate the impact of the UK recession. Here are some tips to minimise the losses and help cash flow when working with overseas clients.
Contract in pounds
Always negotiate to have your contracts in pounds. You’ll save the hassle of having to exchange currency and won’t have the risk of incurring foreign exchange losses. Your fees might be more competitive with the weakness of the pound!
Foreign or multicurrency account
Open a foreign or multicurrency account when you cannot arrange for billing in pounds and provide your overseas client with the bank details. If you receive foreign currency into your pound current account, you’ll have no control over your bank’s conversion rate.
A forward contract can be entered into at the point you raise the invoice to minimise exchange losses. You agree to sell currency and buy pounds after the money is expected from your client but at the exchange rate at the time of invoice. You’ll potentially miss out on exchange gains but you’re not in the business of speculation!
Depending on your client’s country, withholding tax might be deducted from payment if the client doesn’t receive the correct paperwork from you. Ensure you understand what needs to be provided in advance of billing your client to avoid suffering withholding tax.
Ensure the correct details are included on your invoices to prevent any genuine cause for non-payment. For business clients, you should obtain a VAT number or equivalent and add it to the invoice. VAT shouldn’t be charged to overseas businesses, and you may need to include a VAT reverse charge statement.
Make sure your professional indemnity insurance covers you for the country your client is based in. Coverage is often restricted, especially to clients based in the US and Canada.
Please get in touch if you would like to discuss how we can assist you when working with overseas businesses.