Thinking About Doing Business Internationally? Tips for Handling Multiple Currencies Large multinational companies have entire teams dedicated to mitigating the risk that comes with doing business internationally. Here is what small-business owners can do to protect against currency fluctuations.

By Catherine Clifford

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

If you have considered dipping a toe into importing or exporting, you may have balked at keeping up with the fluctuations in value of various currencies. Don't even try, says Guido Schulz, global head of strategic management at Los Angeles-based AFEX, a foreign-exchange consultancy.

Large international conglomerates have entire "forex" teams dedicated to managing finances across multiple currencies. As a small-business owner, you should not be trying to keep up with the second-by-second changes on your own, says Schulz. But if you don't take steps to protect yourself, you could lose money, he says.

Related: Want to Start Exporting? Consider These Hints

Consider a wine merchant who buys wines from France and sells to grocers and restaurants in the U.S. If the value of the euro changes dramatically between the time the merchant orders and when he sells, his profits could be wiped out in the currency conversion.

To protect against such losses, entrepreneurs are increasingly planning out their currency strategies. Since the start of the Eurozone-crisis three years ago, AFEX has seen more than a 25 percent increase in the volume of customers looking to lock in currency rates in advance. Small and midsize businesses make up most of its customers.

Related: Want to Harness the Power of the Crowd? Consider These Tips

Especially if you are just getting started dealing with multiple currencies, be sure to work with an institution that specializes in foreign exchange, says Schulz. It's too much for most business owners to try to handle alone. Banks can help you, and so can many non-bank strategists, like AFEX or International Foreign Exchange.

Consider these tips from Schulz for how to manage your business's cash flow across multiple currencies:

Charge customers in the local currency. It may seem like a good idea to charge your overseas clients in U.S. dollars, eliminating the need for any foreign currency swapping. However, by asking your customers and clients to deal with the foreign-exchange negotiations instead of you, your business could be less attractive and competitive, says Schulz.

Consider locking in an exchange rate in advance. Many small-business owners do not have the cash reserves to withstand a foreign-exchange loss. Schultz recommendst that you look at buying a "forward contract" from a bank or non-bank specialist, locking in your exchange rate for a set period of time. You will pay a commission on the contract, but what you buy is peace of mind. With an exchange rate locked in, you can plan your pricing strategy such that you know you won't lose money. At AFEX, the commission is less than 1 percent of the transaction price for forward contracts, although prices vary depending on the specific contract, says Schultz.

Avoid "casino fever." Entrepreneurs have to wear many hats to run their business, and they may get the idea that they can pad their revenues by "beating the market," buying one currency and selling another for a profit. "That is actually a very, very dangerous thing," says Schulz. Playing the market is too risky for a small-business owner and ultimately, a waste of an entrepreneur's time, he says.

While it should be accompanied by caution and planning, trading with Europe can still be on the table for U.S. businesses. During the sovereign-debt crisis in Europe, speculation grew as to whether Greece, most especially, might exit the Eurozone. "What we have seen is an almost too-big-to-fail scenario," says Schulz, and indications from European Union leaders that they will do what is necessary to keep the countries operating under a single currency. If any countries were to leave the Eurozone, an exit is expected to be planned and orderly, says Schulz, and business owners should not fear recent debts becoming suddenly null and void.

Related: Five Tips for Getting Started in Exporting

If your business operates across multiple currencies, what is your most useful tip for protecting yourself from fluctuations in the market? Leave a note below and let us know.

Catherine Clifford

Senior Entrepreneurship Writer at CNBC

Catherine Clifford is senior entrepreneurship writer at CNBC. She was formerly a senior writer at Entrepreneur.com, the small business reporter at CNNMoney and an assistant in the New York bureau for CNN. Clifford attended Columbia University where she earned a bachelor's degree. She lives in Brooklyn, N.Y. You can follow her on Twitter at @CatClifford.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Side Hustle

This Gen Zer's Stylish Side Hustle Earns About $20,000 a Month and Paid Off His Parents' $200,000 Debt: 'I Enjoy the Hands-Off Nature'

Ray Cao went from working as a barista for $8 an hour to being a successful seller on online marketplace StockX.

Business News

Make $177,566 With No Experience in 3 Months: A Popular Online 'Side Hustle' Course Is Under Investigation After Customers Complain About Its Deceptive Claims

"All you need is a phone, a laptop, wi-fi and one to three hours a day," one affiliate marketer said in a video posted to social media.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Business News

'A Lobstrosity': Social Media Is Losing It Over Martha Stewart's Latest Meal Posting

The 82-year-old caused quite a stir on Instagram this week.

Business News

This Retailer Is the Latest to Remove a Major Feature From Its Stores Due to Rising Theft

Five Below CEO Joel Anderson addressed the company's plans to combat theft in an earnings call earlier this week.

Marketing

5 Trends Shaping the Next Generation of Digital Marketing

These IT platforms offer a unique opportunity for brands to connect organically with their demographic by partnering with influencers who boast a loyal following.