How can a multi-currency account be useful for your business?
Let’s say a business is purchasing goods from a Chinese supplier that requires payment in RMB.
Then that same business sells these goods to its clients based in Europe who fulfil their payment in Euros.
Now, here is the problem that the business faces: it will be working with several currencies at one time. This will inherently affect the way it can operate.
The trade of international goods and services is common practice for most businesses.
It is in their best interest to improve their processes on how to receive and send money in several currencies.
One of the most efficient ways to do that is to set up a multi-currency account for the business.
What defines a multi-currency account?
To put it simply, it is a type of bank account that enables your business to receive and make transactions whilst holding funds in several currencies.
The most significant feature for this sort of account is that the account details (beneficiary name, account number, and SWIFT code) remain the same across all currencies that the business deals with.
Most banking institutions in Hong Kong propose multi-currency accounts.
The currencies that are normally included are the following: Hong Kong Dollar, US Dollar, Euro, British Pound, Singapore Dollar, Japanese Yen, Australian Dollar and Chinese Yuan.
How can a multi-currency account benefit your business?
The five most significant advantages of having a multi-currency account for your business include:
- The bank account number never changes!
This makes dealing with international transactions incredibly efficient, you only ever have to give your international clients one bank account number.
Sparing both time and hassle for both you and your clients as you use the exact same account information for the numerous currencies in your account.
- Reduce your costs spent on foreign exchange fees
Let’s put ourselves in a context where your company holds a single currency account (an account that only accommodates your home currency).
One of your clients pays you in another currency, one that is different from your home currency (let’s use EUR).
Upon receiving the funds, your bank will automatically exchange that currency into your home currency (for example HKD) in order to deposit the transfer into your bank account.
This will naturally also lead to substantial foreign exchange fees that account for the bank converting that currency.
If your business receives a lot of overseas payments in several currencies, then you will find that these additional charges start to add up quite considerably.
A multi-currency account can enable you to avoid paying these expensive charges.
Money that is paid in one currency will be credited to your multi-currency account without needing to convert it.
But only under the assumption that the currency being transferred to your account can be accommodated by your multi-currency account.
- Reduce time spent on reconciling different currencies and on accounting
Your accounting procedures become much simpler when you hold a multi-currency account.
You (or whoever manages your accounts) will therefore be spending much less time reconciling as you gain the capability to distribute an invoice in one currency and get paid in the same currency.
Which means, no more time wasted trying to match the different paid and invoiced sums in various currencies. And less accounting adjustments are necessary to take notice of exchange rate differences.
- Get your head around FX forward contracts
When it comes to international clients, you are likely to have encountered a few who insist on paying you in their local currency.
Undoubtedly, this is most likely not your chosen method of payment, you would prefer to have your client fulfil payment in your local currency rather than their own.
This is not surprising in the sense that both you and your clients will want to avoid exposing your respective businesses to foreign exchange risk.
This can be the source of some tension in a working relationship, but thankfully can be easily resolved with owning a multi-currency account.
It will allow you to let your clients transfer money to you in their local currency (as long as it can be accommodated by your multi-currency account).
Having said, the foreign exchange risk we mentioned above is not eliminated from this equation, since you would still be holding various funds in your client’s home currency in your bank account.
But, the difference is that the risk is not immediate as it would be in a normal single-currency bank account transfer.
This risk only arises if you convert your client’s home currency into a new currency at a point in time when then foreign exchange rate is not beneficial.
To prevent this type of risk, you should think about using FX forward contracts.
For a small fee, these binding agreements will enable you to lock the foreign exchange rate at which you will change your client’s currency in the future.
To conclude, pairing the benefits of having a multi-currency account with FX forward contracts can help maintain your client’s happiness.
- Keep an eye on exchange rates and only trade currencies when the time is right!
Your multi-currency account will give you the ability to transfer money easily between many currencies.
Regardless of whether you are looking to become an FX trader or not, it allows you to recognise when the exchange rates are favourable and when you should attempt to buy or sell currencies.
And the best part is that banking institutions do not charge additional fees on intra-account transfers!
Which types of businesses would gain from using a multi-currency account?
The most attractive benefit of a multi-currency account is that it helps businesses save time and costs that normally go into making and receiving fund transfers in more than one currency.
Essentially, this insinuates that any business that is managing transactions in numerous currencies will find many uses from owning a multi-currency account.
A multi-currency account is particularly useful:
- If your company deals with international trade: whether through exports, imports, or both
- If you run an e-commerce shop that sells goods or services in several currencies
- If you have recruited overseas staff or freelancers
- If you are a freelancer or contractor working independently of a company and handle international clients and payments on a regular basis
Opening a multi-currency account in Hong Kong
Unfortunately, opening a multi-currency account for your company remains one of the most complex procedures to get done with a bank.
But don’t feel discouraged just yet! We’ve got a solution that is guaranteed to pique your interest.
About the author
Bertrand Théaud is the Founder of Statrys, a digital alternative to traditional bank
s specifically designed to re-imagine business banking
and serve the needs of Asian SMEs and start-ups.