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Fair exchange

If you have customers in the UK or any other country outside the eurozone, it is important to ensure you don’t lose out on currency conversion.

While currency risk could be seen as the price of doing business in different markets, the value of the euro against currencies such as the dollar or the pound can move up or down very quickly.

This is not always a bad thing. If you secured an order with a customer in the US and the dollar strengthened against the euro from the time the order was placed until payment was made, you would make extra money on the deal for no additional effort.

But if the dollar became more valuable, you could see some or all of your profit margin disappear.

Coronavirus currency chaos

Foreign exchange is both the largest traded market in the world and one of the most volatile.

Prior to the outbreak of coronavirus it had been relatively calm since the unexpected results of the UK EU membership referendum and the US presidential election in 2016. However, as the scale of the pandemic became clear in March 2020, the pound lost 5% of its value against the euro in the space of four weeks.

However, in recent months the pound has strengthened against the euro as the EU has struggled to secure enough vaccine doses.

Some businesses may look at these movements as a ‘swings-and-roundabouts’ situation, but it is actually more like musical chairs – and you don’t want to be the one left standing when the music stops.

Hedge your bets

Small businesses tend to operate on razor thin margins, which means even a small drop in the value of an order could turn it into a loss-maker.

Hedging is the most common option for protecting a business from unfavourable currency movements. This locks-in the value of the currency exchange, so you know exactly how many euros you will get for the dollars you receive from your US customer.

If you reckon the dollar would be more valuable by the time the order is paid for you might want to take your chances. A hedge will protect you from the downside risk but means you can’t take advantage of a currency move in your favour.

Don’t be complacent

Even the most seasoned currency experts don’t get it right all the time. For the world’s biggest companies the costs are eye-watering – research shows that movements in exchange rates cost European multinational corporations more than $7.5 billion in the third quarter of last year alone.

Once you have your foreign currency, don’t be afraid to shop around for a better exchange rate. Many businesses still automatically use their bank for such transactions, but there are plenty of firms offering better rates. You might also want to check out some of the peer-to-peer exchange services that match individuals and companies looking to exchange a pair of currencies (an Irish company with dollars and a US company with euros, for instance).

As one currency expert puts it, ‘the best strategy you can employ is having complete data’. If you are unsure how currency fluctuations affect your bottom line, the information available from a cloud-based accounting package such as Big Red Cloud is a good starting point.


Marc O'Dwyer

After completing a Graduate program in Marketing, Marc’s impressive sales career began at Allied Irish Banks, Pitney Bowes and Panasonic where he received numerous Irish and European sales performance awards and consistently exceeded targets and expectations. In 1992, Marc’s entrepreneurial spirit led him to set up his own business, Irish International Sales (IIS). Initially, this company was a reseller for Take 5 Accounts and Payroll software. Within four years, IIS became the largest reseller of Take 5 in Ireland, acquiring four other Take 5 resellers. He also found time to set up two mobile phone shops under the Cellular World brand and a web design company offering website design services for small businesses. In 2001, he bought the majority share in a small Irish software business, Big Red Book. At that time, the company was losing money. The company became profitable within two months, and Marc then acquired a payroll company to compliment Big Red Books Accounting products. In 2003, IIS were appointed as Channel Partners with SAP for their new SME product, SAP Business One. Marc sold his Take 5 business and concentrated on developing this new market for SAP As a result, by 2007, IIS was recognised as the largest Channel Partner for SAP in EMEA (Europe Middle East and Africa). In 2008, the IIS Sales Manager bought the Company from Marc in an MBO. He launched Big red cloud in June 2012, the online version of big red book, to date the company successfully converts 59% of trials into sales and the number of customers is growing rapidly. Marc continues to run both Big Red Book and Big Red Cloud which now support 75,000 businesses. He is a very keen sportsman, having played rugby for 20 years, represented Leinster at under 16 and under 20 levels, and league squash with Fitzwilliam Lawn Tennis Club for 10 years. Marc has competed in 11 Marathons, including the London and Boston Marathons, and has completed several Triathlons and Half Ironman races. He has also completed six Ironman Races in Austria(x2), Frankfurt (Germany), Nice (France) , Mallorca (Spain) and Copenhagen (Denmark)

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