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Dealing in foreign currency is not a new concept for most of us. If we are going on holiday from the UK to almost any other area of the world we go down to the bank to buy the currency of the location we are travelling to in order to be able to purchase goods and services in the foreign state. We do not really have to make a decision on whether to buy the particular currency based on its current value against the sterling we need it and if sterling has risen or fallen since we last looked at the particular exchange rate it does not effect us that dramatically, we are still going to take that vacation.

However in business things are different. The opening up of world markets due partly to political process but also technological advance means we can buy and sell from almost any corner of the globe and complete the transaction in a tenth of the time it took maybe even five years ago. The speed and volume of international business transactions completed on a daily basis not to mention the enormous impact of currency and trade speculation presents formidable challenges to businesses who operate cross border and are buying and selling in currencies other than their own.

Closer to home the extension of the European Union to now include twenty-seven member states creating a single market guaranteeing the freedom of movement of people, goods, services and capital using a common currency, THE EURO has dramatically impacted on the flow of world trade. With almost 500 million citizens, the EU generates an estimated 31% share of the world's nominal GDP.

The euro is designed to help build the single market by, for example: easing travel of citizens and goods, eliminating exchange rate problems, providing price transparency, creating a single financial market, price stability, low interest rates, having a currency used internationally and protecting against shocks due to the large amount of internal trade within the euro zone.

In recent years holdings of the euro have grown, and there is some speculation that if the euro zone continues to enlarge, or the US Dollar continues to fall, the euro could become the main reserve currency in the world.

So what has this got to do with me you may ask?

Whether you are a small or large business and whether or not you are trading in currencies other than your own you will be affected by currency transactions on the world stage. If you are buying and selling in your home currency to suppliers and customers who themselves are buying or selling in other currencies you will be affected. The economic value of the territory attached to a particular currency is transferred to the territory with which it trades through the exchange rate mechanism.

The combination of changes in exchange rates and the opening up of world markets, particularly the Euro zone has given businesses and consumers the opportunity of exploiting the movements in exchange rates to their advantage. Or put another way, if you are dealing in a product or service which is affected by exchange rate changes and most ultimately are, the transparency of the market will ensure the impact of any exchange rate movement will feed through to the price you are paying or your customer is buying. Ultimately no one can remain isolated from all this.

Using the multicurrency option

Many more of our clients are purchasing or selling in currencies other than their own. This is a direct result of competition from operators in other territories and for the UK mostly to and from the Euro zone.

The following aspects of foreign currency trading are very important to these clients:

  • What is the cost to my business of purchasing a product or service from a supplier who quotes a price in anything other than my home currency?

  • How much will I earn from a deal where I need to quote a price to a customer in a currency other than my own?

  • How do I process these currency transactions through my accounts in the most accurate and efficient way.

  • How do I monitor and control my exposure to foreign currency trading?

Our multicurrency service option answers all these questions thus:

  • All the major currencies are linked to real time rates directly from the currency markets so that you are able to see the rate against your base currency that is applicable as you process a transaction in the chosen currency. For most UK based currencies this is sterling but there are subsidiaries of overseas parents i.e. US companies that require the base currency to be the US dollar and the system can handle this.

  • All purchase, sales, banking and cash information can be entered into the online system in the currency in which the transaction originated.

  • Receipts and payments in any currency can be processed via any bank account reporting currency gains or losses as incurred.

  • To monitor and control your foreign currency exposure go to our "Advanced Reporting" section.