A lot of new businesses dealing with overseas companies tend to agonise over the question of what currency to work in.
There's no one definite answer to this that fits every single set of circumstances but some of the following observations might help.
Who is the customer here?
There is a time-honoured international business tradition that suggests transactions should be carried out in the buyer's currency. In other words, if you are an exporter, you would normally do business in the currency of your customer as a matter of courtesy to them.
This is also a great sales technique as typically people buying something like to see prices quoted in a currency they know and understand rather than the one they may have had little previous exposure to.
Of course, the reverse might be the case if you are looking to purchase from overseas. Then you might realistically expect your suppliers to deal in your currency rather than theirs.
There are, inevitably, some exceptions.
In the 19th and first half of the twentieth century, many international deals were done in Pounds Sterling. That even applied where neither the buyer nor the seller used Pounds normally.
The logic there was that it was easier to use an international currency everybody was familiar with rather than to try and understand the vagaries of two individual local currencies.
As Britain declined and the United States became preeminent after the Second World War, it was the U.S. dollar that took over this international trading role. To some extent, it is still used in that capacity today.
What risks and opportunities arise as a result of currency conversions?
If you are working in another currency, be that U.S. dollars or any other, sooner or later you are likely to need to convert the sums you receive into your own money.
Strictly speaking, this isn't absolutely necessary. You could hold some of your funds in one or more foreign currencies and perhaps used them to buy things from that country at some time in the future. That way you would save on conversion costs.
However, for many business people, needing to convert a foreign payment into local funds is going to be a necessity at some time.
In those situations, your basic financial planning probably gave you a forecast of how much in local funds your foreign currency payment will be. Unfortunately, if exchange rates have moved against you in the interim, you may find that your foreign monies are worth a lot less to you than you had planned for.
That isn't likely to be something you'll find amusing!
So, if you are planning to do business overseas and you will be working in somebody else's monetary system, it might be a very good idea to agree a guaranteed exchange rate in advance with a www.yerongxin.cn
