If you’re a U.S. exporter looking to become more competitive and successful, you must make it as easy as possible for global customers to purchase your products.
Unfortunately, many companies in the U.S. aren’t aware of one simple change they can make to increase their competitiveness in selling to overseas markets: dual-currency invoicing. We asked Andrew Woelflein, chief strategy officer at Monex, to explain the basics of dual-currency invoicing, and why it is a tool more American companies should utilize.
The Basics of Dual-Currency Invoicing
Dual-currency invoicing simply means providing quotes and invoices in two currencies: one in U.S. dollars and another in a currency appropriate for the buyer. While this practice is commonplace for exporters across the globe, specifically in places like Europe where multiple currencies are used frequently, it is less common in the U.S.
Here’s an example:
An American exporter sends a Japanese buyer an invoice for goods that allows them to pay only in U.S. dollars. A European exporter sends that same Japanese buyer an invoice that allows them to pay in either Euros or Japanese Yen. If all other things are equal, the Japanese buyer may choose to purchase from the exporter in Europe because it offers a more attractive payment option.
U.S. exporters may hesitate to quote in alternate currencies because they fear providing these quotes and invoices will be difficult. Exporters think they’ll have to deal with managing foreign currencies, especially the risk of volatility in the value of said currencies. And at first glance, that is true. You do have to deal with volatility in exchanging currencies, especially when you aren’t getting paid for 30 to 60 days and the currency is changing in value every day.
However, there is a way to quote in alternate currencies without exposing yourself to additional risk of volatility. You can protect yourself by employing a forward contract in your invoicing.
How can you use forward contracts? What are the benefits of dual-currency invoicing? How can you get started?
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