Overseas placements are becoming increasingly popular among recruitment agencies, thanks to higher profit margins and growing opportunities with international clients. While the process of making these placements is often similar to placing candidates in the UK, one key difference is that international placements are typically not conducted in sterling. As a result, agencies must manage the risks associated with currency fluctuations.
Although international placements can be profitable, agencies often face losses due to exchange rate changes when transferring and accounting for foreign currency transactions. Since UK businesses are required to report financials in sterling, agencies must account for gains and losses on unpaid invoices and currency held in non-GBP accounts.
To help mitigate these risks, here are some effective strategies recruitment agencies can use to reduce currency losses:
CHARGE AND PAY IN THE SAME CURRENCY ON CONTRACT PLACEMENTS
When making contract placements, it’s advisable to ensure that both the client is invoiced and the candidate is paid in the same currency. This approach minimizes currency conversion and reduces the risk of losses between the time of payment to the contractor and receipt of payment from the client.
OPEN A CURRENCY BANK ACCOUNT
Opening a currency-specific bank account is a straightforward way to reduce losses. Receiving foreign currency into a sterling account often incurs additional fees, and the bank typically applies its own exchange rate. By accepting payment into an account in the same currency, the agency can choose the optimal time and rate for conversion to sterling.
ENSURE THAT THE INVOICE FINANCE CAN FUND IN THE REQUIRED CURRENCY
If your agency uses invoice finance, it’s important to confirm whether the provider can fund invoices in the relevant foreign currency. Ideally, they should set up a currency ledger that matches the invoicing currency, which allows the agency to receive funding without immediate conversion to sterling. Note that not all providers offer multi-currency support and many only fund in euros or US dollars, so check this early on.
WORK WITH A CURRENCY EXCHANGE PROVIDER
Partnering with a currency exchange specialist can help reduce losses and improve timing on conversions. These providers offer market expertise, guidance on ideal conversion rates, and tools such as forward contracts or hedging solutions to lock in favourable rates. When dealing with large sums, their advice can be invaluable.
MAYACHI has extensive experience supporting agencies making international placements. We help agency directors navigate the complexities of working with foreign currencies, from setting up the right currency bank accounts to advising on funding facilities and introducing trusted currency exchange partners. Our goal is to help minimise the financial risks of overseas transactions and ensure your agency remains profitable and compliant.
