Accepting Sterling Payments

BnB

Quick question on accepting Sterling Payments.

We have a normal Irish BOI Business account. I sent a company in the UK an invoice in Sterling in January. I also sent them my bank details (IBAN, Swift code etc). They paid it a day later. We got the Euro equivalent of the Sterling Amount I charged them and BOI charged us a fee (€5 I think) for handling the transaction.

That was all fine. I am not worried about the fee charged to us by BOI or the exchange rates for now.

My question is.... Would my customer have been charged anything on his side, or would it have been the same to him as paying another UK company.

i.e. He went to his bank - Gave our IBAN etc - And said - Pay these guys £100 (Sterling) from my account. Would that have cost him anything more in bank fees than if he had paid the same amount to a UK company

I talked to a girl in BOI and she seemed to think that no - he wouldn't be charged anything - as he never changed currencies - and all the charges were on our side (which is the way I want it) But she didn't seem sure.

Thanks in advance

jimmii

Whenever we pay Sterling invoices from our AIB account we pay for the exchange its getting horrible at the moment with the rates going up the other day it worked out as just over 1.26!! I would have thought their bank would have handled the exchange and would have charged them whatever crazy rate they decided on that day!

BnB

jimmii wrote: »

Whenever we pay Sterling invoices from our AIB account we pay for the exchange its getting horrible at the moment with the rates going up the other day it worked out as just over 1.26!! I would have thought their bank would have handled the exchange and would have charged them whatever crazy rate they decided on that day!

Thanks - But thats not the Same Jimmi. You are paying Sterling from a Euro A/C so you will have to take the fees. In your case, you pay the fees and your supplier doesn't know any different.

But I am asking a UK company to pay Sterling from their Sterling account to me.

pedroeibar1

Not certain what happens now that SEPA has come into play; under the old system there was no extra cost – simply UK payer authorised its bank to pay funds to Irish payee at an IR bank, money was debited to payee’s account and credited to the IR bank’s overseas account in the same jurisdiction, which then passed on the funds to payee’s account at its bank in Ireland.
I'm open to correction on this, but I’d guess that is replicated in the new system with a few IT automated bells and whistles, and does it the same way, which is why you get the transaction charges.

jimmii

Sounds like you were kind enough to pay all the fees for them that was very good of you! You would have thought the bank was the best place to ask about bank fees but I guess not! I would have thought if they paid a sterling invoice in sterling they are unlikely to have had to pay any fees.

Actually do have the same example one of our UK suppliers invoices us in Euro and we get no additional fees with them guessing they pay to exchange it at the other end much in the same way you have.

srsly78

OP you are not actually getting paid sterling, you are getting paid in euros. It is not possible to put sterling into a euro account, it has to be converted first. Foreign exchange attracts fees. The banks try to hide this step because they make a lot of money on the exchange spread, while often claiming there to be no fees. Don't use a bank to convert currencies if possible.

In your transaction above, someone is paying these fees - probably yourself. If it only costs the customer £100, then it is you that absorbs the FX fees.

If you had your own sterling account then the customer could pay into it without any charges. This is how I accept sterling payments (with my uk sterling account). Then I use an fx broker (www.midpoint.com) to convert the sterling into euros and remit it back to Ireland.

pedroeibar1

Read the question.

srsly78

It depends how you think about it. The customer may only pay £100, but that £100 isn't all going to the OP. Rather the customer is paying £95 to the OP and £5 to the bank in fx fees.

Either way, it only "costs" the customer £100 - and the OP loses some money to middlemen.

pedroeibar1

BnB wrote: »

I am not worried about the fee charged to us by BOI or the exchange rates for now.

My question is.... Would my customer have been charged anything on his side, or would it have been the same to him as paying another UK company.

Clear now srsly?

Voltex

Just a handy tip..if you have regular purchases in £ and customers paying in £ it maybe worth opening a sterling a/c...that way you can service your payables fee free.

srsly78

pedroeibar1 wrote: »

Clear now srsly?

I think I have explained it as well as I can, are you still confused?

pedroeibar1

srsly78 wrote: »

I think I have explained it as well as I can, are you still confused?

Never was confused. Pity about your explanation though, there's no future for you in forex.:D

pedroeibar1

Voltex wrote: »

Just a handy tip..if you have regular purchases in £ and customers paying in £ it maybe worth opening a sterling a/c...that way you can service your payables fee free.

Valid & good tip, used to be called a sterling hold account; but being a bit pedantic, that was not part of the question (which has been answered.)

A Stg account would be useful if there was inflow/outflow, which would minimise fees (a one-off fee for a single month-end transfer to the € a/c, rather than a series, one for each invoice.) Downside is exposure to currency volatility on transfer out, but it would reduce volatility risk if stg. purchases are being made. A forward cover or hedging arrangement could also be used. Problem is that most branch banks have nobody who understands business banking anymore, which probably is why the OP posted here in the first place.:)

Voltex

pedroeibar1 wrote: »

Valid & good tip, used to be called a sterling hold account; but being a bit pedantic, that was not part of the question (which has been answered.)

A Stg account would be useful if there was inflow/outflow, which would minimise fees (a one-off fee for a single month-end transfer to the € a/c, rather than a series, one for each invoice.) Downside is exposure to currency volatility on transfer out, but it would reduce volatility risk if stg. purchases are being made. A forward cover or hedging arrangement could also be used. Problem is that most branch banks have nobody who understands business banking anymore, which probably is why the OP posted here in the first place.:)

Banks understand FX vagaries better than anyone else and make a few quid (pennies actually) through triangular arbitrage.

pedroeibar1

Voltex wrote: »

Banks understand FX vagaries better than anyone else and make a few quid (pennies actually) through triangular arbitrage.

Not what I said Voltex, I spoke about branch banking. You mention triangular arbitrage to a branch banker and its eyes will glaze over. Anyway, we are talking about two currencies here, not three, and triangular arbitrage opportunities exist only when the bank’s quoted exchange rate is not equal to the market's implicit cross exchange rate. (I used to work in a dealing room, many years ago) Careful now Ted. Yes Dougal,

Voltex

pedroeibar1 wrote: »

Not what I said Voltex, I spoke about branch banking. You mention triangular arbitrage to a branch banker and its eyes will glaze over. Anyway, we are talking about two currencies here, not three, and triangular arbitrage opportunities exist only when the bank’s quoted exchange rate is not equal to the market's implicit cross exchange rate. (I used to work in a dealing room, many years ago) Careful now Ted. Yes Dougal,

Yes..two currencies. If you were so inclined and you had a sum that would make it economical, you could purely for example exploit a situation of a strong £:CHF cross with a weak €/CHF to get back to €'s with a net gain.

BnB

pedroeibar1 wrote: »

....Problem is that most branch banks have nobody who understands business banking anymore, which probably is why the OP posted here in the first place.:)

OP here

Got it in one Pedro

I talked to a random girl in the bank. She didn't have a clue. I then talked to the manager (and my business adviser). He knew a small bit more, but still couldn't answer me for sure. I found a phone number on the BOI business site for support with foreign currencies - turned out to be an invalid number...!!!!

Anyhow, I am happy for now - If I invoice my UK customers in Sterling, and they pay me by bank transfer, I get the hit on the fees and not them. Which I am happy with.

But I think I will open a Sterling a/c sooner rather than later.

Thanks for the replies

pedroeibar1

Glad you’re sorted, BnB.
Your issues highlight just some of the problems in Irish banking. Too many staff are trying to sell ‘flavour of the month’ products about which they know little and with absolutely no understanding of the fundamentals of the business. A long, long time ago I worked in a niche bank in London for a few years. Rule No. 1 was nobody was allowed answer the phone/talk to a customer until s/he had scanned that morning’s FT. Wouldn't do to have a customer know more about what was going on than an employee. We had to know more than a bit about everything - lending/deposits/FX/TF/Markets before we were allowed meet a client. Pity those days are long gone in Ireland.

A Stg a/c would be worthwhile if you have sufficient Stg. inflows/outflows. A danger is that you could become complacent on rates, so do shop around periodically and keep your bank on its toes (they actually will respect you for it.) Try to build a relationship with your bank business advisor (if s/he is not moved too regularly!) – in medical terms s/he should be like a GP and should refer you to a ‘specialist’ when you have need.

When I rotated to the sales/trade finance team we used to cringe when clients told us what the USD/GBP/CHF/Pta/Lire/whatever was going to do. Those guys always got reamed, because nobody knows for certain beyond a couple of days. Do not play the currency market– just concentrate on you business, and do what you do best. This country needs exporters like you, so thanks!

pedronomix

Best Tip on handling multiple currency receipts and payment ever! I got this from my Dad many years ago. Open a Stg£ account and have all payments made by UK customers made in to it, then pay all UK suppliers out of it. If you had a surplus of Sg£ use it to buy other currencies such as USD$ to make payments in tose other currencies. This is the ulrttimate form of self-hedging and minimises exchange commissions and takes much of the actual risk out of it. Irt also added to the company image as a "serious company" and a "bit local" to UK customers. This is even more true today with online selling and Uk credit cards etc etc . Online banking makes management of funds so easy and all the main banks have their own or alliences with a major UK clearing bank, it can all be set up through your bank here! QED!!

Surely BOI can provide you with a sterling account alongside your Euro account easily?
I have a business account with HSBC, its 4 currencies and I didn't have to ask, automatically included with setup