How Can My Agency Reduce Currency Losses?
More and more agencies are now looking outside of the UK to make contract and permanent placements, often with lucrative results as many countries have skill shortages within certain industries that can be filled by UK candidates. Whilst the rewards on international placements are worthwhile, there are a number of precautions that need to be taken to ensure that you do not lose any profit unnecessarily, especially on currency losses. Whilst in some cases you can make profitable gains on currency, the large majority of the time there will be losses due to converting the currency to sterling.
Below are ways that your agency can reduce any currency losses on international placements:-
- Ensure The Currency Bank Account Is Set Up In Advance
If your agency makes an overseas placement you need to ensure that the clients can pay to the corresponding currency account. Setting up currency bank accounts can take 3-5 days so it is vital to do this as quickly as possible to avoid delaying the sending of invoices. If your clients pay to a different currency account then the bank will convert the funds at a very unfavourable rate.
- Charge Clients And Pay Contractors In The Same Currency
When making international contract placements it is advisable to ensure that you pay the candidate in the same currency as the client is being charged to avoid any ongoing currency losses on the placement. If either of the currencies exchange rates fluctuates then you may move to a position where you no longer make any profit. If the candidate requests to be paid in a different currency, you are not obligated to comply and can still pay the currency amount to their desired bank account and they can suffer the losses on their own funds.
- Only Convert Currency To Sterling When Required
As a UK registered recruitment agency, most of the agencies overheads such as salaries, suppliers and expenses along with taxes due to HMRC such as PAYE, VAT and Corporation Tax are due in sterling so any profit generated on currency placements will need to be converted at some point into sterling. Reducing the number of times that currency is converted or using an FX conversion company to get a favourable spot rate will reduce the chance of losing on the currency exchange.
- Ensure Your Invoice Finance Company Can Provide Funding In Currency
Most recruitment agencies making contract placements will use invoice finance to bridge the funding gap between when then candidate needs to be paid until the client makes payment. However, not all invoice finance companies can provide funding on placements outside of the UK and some will only be able to provide funding in Euro or US Dollars, so it is vital to see if they can provide the appropriate currency and funding requirements.
TBOS has the capability to provide back office and accounting support to agencies making international and currency placements. TBOS can raise the invoices in currency, help arrange funding with reputable invoice finance companies and provide credit control services to various time zones. TBOS also has experience with providing compliance, taxation and contractual information on placements within numerous countries worldwide. We also work closely with the agency directors to provide advice and support on ways of reducing currency losses on placements.
For more information on how TBOS can help support your agency making international placements, please contact our office.