A sometimes neglected pricing best practice is quoting customers in the same currency as your production expenses to protect yourself from fluctuations in currency values. Though some countries in Eastern Europe, Latin America, and Asia Pacific may require invoicing in their local currency, sellers are usually able to minimize this problem by first quoting customers in these countries in USD or EUR but then invoicing them in the local currency using that day’s exchange rate to reduce currency exposure. Companies may actually have more trouble getting British or Western European customers to pay for U.S. produced goods in dollars, as forcing them to pay in USD can be seen as a hassle at best, and downright insult at worst.
Even after a slight recent recovery, the Euro is still down nearly 15% vs. the dollar this year. For companies with U.S. production facilities shipping product abroad, after years of “currency effect” usually being a blessing, it has now finally turned to a curse. Now is a great time to analyze the effect the Euro decline is having on your business at the customer/product level in addition to the macro level – even if you’re unable to pass along higher pricing right now, it’s important to understand this cost at the customer level to avoid having account managers grant additional concessions you can’t afford given your new lower (or negative) profitability on the account. In addition it’s important to understand your new profit levels for any future negotiations, as you can’t wait on the Euro to bring your profit back with it.For answers on how to make sure your profits are not dependent on currency traders feel free to contact us anytime.
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