The world is getting smaller and better technology means that looking outside the UK for business can be both good for your company and sometimes necessary. Expanding into other markets does not have to be a frightening proposition, but it is crucial you know what you are doing if your company is based in the UK.
There are certain things that need to be done and at Zervant we hear the same questions on a regular basis, such as:
- Do I need to invoice in a different language?
- How do I calculate the exchange rate?
- Which country’s VAT rate should I use?
- Can I be paid in euros with a UK bank account?
- How do I invoice in a certain currency?
- What about Brexit?
These are all excellent questions and show you are thinking along the right lines. We can give you the tools to succeed and the advice to keep you on the right track.
Should I invoice in another language?
When dealing with a customer from another country that does not have English as an official language, there is always the issue of which language to send your invoice in. In the UK, we are not known for our language skills, so it is probably expected that we will send invoices in our mother tongue.
However, invoicing in your customer’s language shows:
- a commitment to them
- makes them feel wanted
- helps to speed up payment
- Gives you a chance to learn and work in a new language
Note: if you are going to invoice in a different language, it is always better to have it done by a certified translator. This will save you from any unnecessary errors and possible confusion. It also keeps you right if you have to deal with the authorities in either country or in case of an audit.
As for writing the perfect email to attach your invoice to – we’ve written a short guide. How to send the perfect invoice email.
Should I invoice in another currency?
First of all, you do not have to invoice in foreign currencies. However, much like the language question, your partner will surely prefer to pay in their local currency.
Charging in Sterling
If you decide to invoice the amount in Sterling, obviously there is no need to worry about exchange rates (see below).
Invoicing in a foreign currency
This will come with costs. Each individual bank charges its own fees for foreign currency transactions into Sterling, so make sure you know the rate beforehand.
If you want to avoid or minimize these charges, there are options available such as PayPal and Wise (formerly Transferwise). As more business is conducted between different countries across borders, more solutions are being found that bypass traditional banks. But, make sure you investigate these companies fully before committing to them.
All of Zervant’s accounts – both free and premium – offer support in 5 languages, so we are on hand to help you. To see the benefits, visit our Features page.
Receiving payment into a UK account from abroad
Firstly, you need to be aware of the exchange rate (see below) and any fees that you may have to pay before the money arrives in your bank. This is the ideal point to contact your bank and ask about this. Different banks have different fees and rates, so do look around to find the one best for you. They are always looking to attract clients, so you may well have the upper hand.
How long does it take?
Again, it depends on the bank, but the average amount of time to receive money from abroad is three to seven working days.
If you want to receive the money faster, look into specialists that deal with international transfers such as the ones mentioned earlier. They are often far quicker and more efficient.
What do I need to include?
If you do go with a bank, this is what you will need to include in your client invoice:
- IBAN (international bank account number)
- Your bank’s BIC (business identifier code) – this is a code exclusive to your UK bank
- Foreign currency amount
- Your full name and business address
- The company’s account number and sort code
Exchange rates go up and down constantly – sometimes many times a day. For this reason, it can be difficult to know the right amount to charge in a different currency. Fortunately, the UK Government sets monthly exchange rates for businesses, all of which have a stipulated start and end date.
The other options available to you are the European Central Bank’s live exchange rate. This is usually updated at 15.00 GMT daily.
As a courtesy to your customer, you can always inform them beforehand that this is what you will be using.
Exchange gain and exchange loss
Gain and loss is when the amount marked on the invoice is different to what you receive from your client, due to a change in the rate of exchange.
If you decide to work with a French company, you have the Pound Sterling as your currency and the French company deals in Euros. Obviously, the two currencies do not stay the same against each other constantly and will fluctuate.
Therefore, if you send an invoice amount of GBP 500 on 31.05, the exchange rate of the Euro to the Pound could be EUR 1.12. But, when the company goes to pay the invoice 10 days later, the exchange rate may have shifted to EUR 1.25. This means that instead of receiving EUR 560 in payment, you will actually get EUR 650 – a big shift.
What can I do about it?
If you are a small company who only deals in smaller amounts, it shouldn’t make too much difference to you or your customer. Although, you will have to pay more tax if you receive a larger amount of money than anticipated.
Talk to your customers as the relationship begins and mention this could be an issue, so that you are aware of their thoughts on the matter. Over time it may balance out, but no one wants to feel they are being cheated.
What about VAT?
Firstly, you need to work out whether your company is eligible for VAT. You can find out more from the UK Government’s website.
If your company is registered in the UK and your place of supply is the UK, then you must pay the British rate of VAT as normal. Here, the ‘place of supply’ is where you supply your good or services to. Always make sure you are aware of the amount of VAT you will have to pay for each invoice issued.
Before Brexit, the country’s rules on VAT automatically extended to the European Union. However, at the start of 2021, the rules changed. The British government has brought in a system known as ‘postponed accounting’, which includes all good imported from both EU and non-EU countries into the UK. This means that all VAT-registered UK firms can allocate VAT to their VAT return, rather than paying import tax on their VAT return as goods arrive into the country.
If your place of supply is outside the EU, then you do not pay EU VAT but the sale should be included in your VAT Return.
Note: If VAT is due in the UK, then everything must be converted into Pound Sterling for the benefit of HMRC.
For more info regarding VAT, have a look at the UK government’s breakdown.
Invoicing in a post-Brexit world
Please note that customs and duties rules on goods have now come into force and both must now be paid. For more info on the post-Brexit rules that have come in, have a look at this article from ICAEW.
How can Zervant help?
We have years of experience dealing with cross-border interactions, so you’re in safe hands. No matter if your customer wants to receive emails by post or email, we can take of that for you. Reach out and let’s have a chat about how you can make your business go global!