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We're a business with a US dollar account. Should we hold or sell?

The first thing to say is that Prime Cap is not the place to get a direct instruction to sell your currency today, tomorrow or at some time in the future. We aren't here to tell you where rates are going to go.

Sorry to start with a negative, but, we are not in the business of 'calling the market' for our clients.

This means we are not comfortable or allowed (from a regulatory perspective) to tell you to wait to do your exchange because we think the rate will be better some other time.

For one thing, it is not really possible to approach currency exchange in this way for SMEs or personal exchange activities.

Speculation of this type, for speculation it is, is reserved for regulated investment advisers dealing in currencies as an asset class.

If the broker you're talking to suggests they know something for sure, in terms of where rates will go, listen to the alarm bells that should be going off in your head.

An authorised payment institution and any of it's appointed representatives is regulated for payment services, not currency speculation - no ifs, no buts, no coco-nuts.


Having said all of the above, we give you guidance as to how to view the risks you face of rates going against you. And, let's remember that going 'against you' means you are able to buy fewer pounds with the dollars you hold.

It is a question of need.

What do you need dollars for and what do you need the currency you'd exchange those dollars in to for?


Take a UK business that allows it's customers to pay it in US dollars.

This business could be in any sector. They might be a subscription service, receiving a monthly payments for advice, copy, products or insight they sell around the world.

They might be an online retailer selling their wears to any and all global customers, and using an inbuilt converter in their website to tell their customer what the US cost of a UK based product is.

If you invoice in a foreign currency then it is up to you to decide what you do with that currency when it arrives with you. Selling your products and services in a foreign currency, whatever industry you are in, means you are lumbered with dealing with the conversion and use of those currencies collected.


Many businesses simply have any foreign currency amount paid to their UK held sterling account. This tends to be because they operate in sterling and haven't given any more thought to opening an account in the currency(ies) they're selling in.

Having a foreign currency paid to your UK sterling account means that the sterling amount you received is determined purely by your bank, who convert the incoming foreign currency in to sterling when the money arrives.

Hence, the sterling amount you receive could be very different to what you expect and it will also be very different to what you might have calculated when estimating the GBP equivalent of the foreign currency sales you have logged.


So, we will simply look at how best to make sure that you get the most pounds you can and we will talk about what simple over-the-counter tools you might find useful in managing your payments, your foreign currency earnings and your foreign currency expenses and payments.


The overriding sentiment, indisputable in fact, is that you will get a better rate of exchange for a specialist that you will from your bank. We caveat that by saying that some businesses are in a position to negotiate hard with their bank, but, SME's with turnover of £6.5 million or less generally don't have the leverage, plus, businesses with a turnover greater than this may lack the expertise to negotiate as effectively in favour of a better rate.

Leaving the exchange up to your bank will leave you worse off for any number of reasons. We go in to those reasons in others posts, but, for this post we will simply focus on what should be doing.

Opening a currency account denominated in the main foreign currencies you earn in is a very sensible option.

It doesn't solve the problem of giving you a better rate per se, but, it does give you control over when and indeed how your currency gets converted.

For businesses that do not want to open a foreign currency account, or for those companies that think they foreign currency earnings are too small and infrequent to justify an account that might carry a monthly fee, our segregated client account facilities can serve as a very useful, easy and free collection facility.

You can have your customer pay directly in to this account, or, you can introduce our currency account at the back end of whatever payment software you use to conduct your sales.

It acts as a silo and, provided you let us know what we should expect, who from and what amount, we can take care of applying the funds to your balance sheet with us.

You get notified USD, EUR, AUD or JPY has arrived in the facility and you can either login to convert it or talk to our brokers about other ways of approaching conversion of what you've collected.


If you do go down the route of opening your own foreign currency account for your business, then, you can use us for the exchange of the funds.

Just because you have opened a foreign currency account with your bank does not mean you are restricted to using the bank for the exchange.

This is a common misconception and one of the reasons why, although a business has taken the positive steps of setting up a foreign currency account, they see no cost benefit.


Holding your own foreign currency account can be extremely useful for businesses that have foreign currency expenses themselves.

If you are an online business in the UK with customers in the United States, for instance, but you work with a supplier in the Far East who invoice you in US dollars, collecting your US dollar revenue in your own US dollar account means you can make international payments direct to your supplier without exchanging your FX revenue in to sterling first.


The question posed in the post title - 'Should we hold or Sell?' - is answered best when we consider what you use your foreign currency revenue for.

If you have no foreign currency outgoings then you might think it makes sense to, once the rate is at an appealing level and once you have completed a certain sales cycle, sell your currency in to sterling.

That makes sense and that is something we can assist with, but. we would tend to advise retaining a float in that foreign currency incase you incur any foreign currency expenses, such as returns, complications with an overseas supplier or distributor or simply if the rate of exchange isn't particularly attractive and you don't want to put all your eggs in that one exchange basket.


Just because your suppliers invoice in a currency different to the one you earn your foreign currency revenue in, for instance you sell in US dollars but, pay your suppliers in euros, doesn't mean you should convert your revenue in to sterling then pay it out again as euros.

Converting from USD to GBP, then pay back out in euros will mean you are losing a fraction of the currency amount each time you exchange.

It might be more sensible to exchange some of your US dollars in to euros in anticipation of your euro payments.

We can take a look at the rate between USD and EUR in just the same way, and applying precisely the same level of care and competition, as we do when exchanging from USD to sterling.

So you have options that you may not have thought of, all of which a driving towards reducing your costs and optimising the rate you get.

Should you 'hold' or 'sell' your foreign currency revenue? It depends on what you have upcoming, who you need to pay and what currency you're best holding a surplus in.

Give us a call if you would like us to talk you through how we approach arriving at bespoke solutions of this type.

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