You've just bagged a project with an international client, and now it’s time to get hustling. However, you need to raise an export invoice for 50% of the advance amount. How should you present your charges? Should you opt for the comfort of your native Indian Rupee (INR) or invoice in foreign currency?

The quick answer to this is you should invoice in the currency of your client - say if your client is based in the US, you should invoice in USD, however there are other considerations which can significantly affect costs, fees, tax compliance, and financial management.&nbsp;

Let’s delve into the complexities of international transactions and explore factors to consider when deciding whether to invoice in Indian Rupees (INR) or a foreign currency. Additionally, we will shed light on the relevance of SWIFT, LUT, FIRA, and FIRC in navigating the payment process for international transactions.

Before deciding on the invoicing currency, you must consider the costs and fees associated with international transactions.&nbsp;

As the volume increases, your business may benefit from <a href="https://www.investopedia.com/terms/e/economiesofscale.asp">economies of scale</a>, enabling you to negotiate better rates with service providers and suppliers. Higher transaction volumes can also justify investments in streamlined processes and technologies that enhance efficiency and reduce costs.

If you are servicing clients from the US or UK, it is more straightforward and convenient to bill in that currency as it provides better financial stability and credibility. However, you can bill in your local currency if it is stable.&nbsp;

International payments generally include intermediary bank fees, transaction fees, conversion fees, and other administrative charges levied by financial institutions or payment service providers for additional transactions or payment-related services&nbsp;

Let's say you are a tech export business based in India sending an invoice to clients in the United States. Suppose your invoice is in USD, and your bank charges high fees for currency conversion. In that case, it may be more cost-effective to invoice in INR with an export payments partner like Skydo to minimise transaction costs and ensure that you receive the maximum possible amount. Skydo charges a flat fee for each transaction.

4. Tax Implications of Charging in Different Currencies

Sending an invoice in INR may subject the trade to Goods and Services Tax (GST) based on the nature of the transaction and relevant thresholds. As an IT services exporter, accepting foreign payments in INR will be subject to 18% GST. Therefore, you will need to add that tax amount to your invoice.

Conversely, invoicing in a foreign currency might have different tax implications, such as potential exemptions or other GST treatment. For example, if you accept the payment in USD, you must submit a Letter of Undertaking (LUT) (explained further in the article) per government regulations. Read more about the taxation rules and regulations concerning foreign transactions <a href="https://www.skydo.com/blog/understanding-gstin-requirements-for-export-businesses-in-india">here</a>.&nbsp;

International transactions expose businesses to currency exchange rate fluctuations, which can impact the value of transactions and profitability. Swings in exchange rates can result in potential gains or losses, affecting the overall cost of the transaction and financial performance.

6. Competitive Positioning in Foreign Market

Business in foreign markets often entails additional costs to establish and maintain a competitive position. These costs can include market research, advertising and marketing expenses, customisation of products or services to suit local preferences and investments in distribution channels. Such expenditure is necessary to penetrate and compete in foreign markets effectively.

7. Accounting and Reporting Considerations

International transactions necessitate compliance with accounting and reporting standards specific to each jurisdiction. It involves additional administrative efforts, such as preparing financial statements according to local regulations, adhering to tax reporting requirements, and potentially engaging with local accounting professionals to ensure compliance.

Engaging in international transactions requires businesses to navigate various legal and regulatory frameworks in different jurisdictions. It may include understanding and adhering to foreign trade regulations, customs requirements, import/export laws, intellectual property protection, and other legal obligations. Non-compliance with these regulations can lead to penalties, legal disputes, or reputational damage.

Assess the preferences of your international clients. Some clients may prefer invoices in their local currency to simplify accounting and budgeting processes. Others may be open to invoicing in your local currency. Understanding your clients' preferences will help you determine the most suitable invoicing approach that’s also profitable for your business.

Once the decision regarding the invoicing currency is final, the next step is determining the appropriate payment methods for international transactions.

Payment Methods for International Transactions

Several payment options are available, each with its advantages and considerations.&nbsp;

Businesses should evaluate <a href="https://www.skydo.com/blog/navigating-payment-platform-headwinds-to-stormproof-your-business?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">payment methods</a> based on transaction fees, processing time, safety, and customer preferences to make informed decisions.

Bank transfers, credit cards, online payment platforms, and letters of credit are among the popular choices.

This payment method often involves transaction fees (flat rates or percentage-based), which can vary depending on the banks involved and the nature of the transfer (domestic or international). Bank transfers typically require some processing time, especially for international transfers, which may take a few business days to complete.&nbsp;

They offer a level of safety as they typically require authentication and verification processes to initiate the transfer, reducing the risk of fraudulent transactions.

Businesses and individuals favour bank transfers if they have established relationships with their banks, for larger transactions, or when payment needs to be directly transferred to a specific bank account.

They are popular among consumers for their simplicity, ease of use, and convenience. Credit card payments usually involve transaction fees, which vary depending on the merchant's agreement with the financial institution and the type of credit card used.

Credit card payments are processed quickly, often settling within seconds or minutes. This makes them suitable for time-sensitive transactions or situations where immediate payment confirmation is required.

They also provide a certain level of safety as they are protected by fraud prevention measures and dispute resolution mechanisms provided by credit card companies.

These platforms charge transaction fees that can vary based on the platform and the type of transaction, either as a fixed amount or a percentage of the transaction value.

Online payment platforms enable fast processing of payments, with transactions often settling instantly or within a few minutes. This makes them suitable for efficient and time-sensitive transactions.

These providers also prioritise security and employ encryption technologies to protect sensitive financial information.&nbsp;

Online payment platforms have gained popularity due to their global accessibility, secure transactions, and ease of use. They cater to diverse customer preferences, particularly e-commerce transactions, international payments, and peer-to-peer transfers.

Letters of credit entail fees charged by banks for their intermediary services, which can vary based on factors such as the transaction's complexity, value, and the agreed-upon terms and conditions.

Processing letters of credit may take longer than other payment methods due to the comprehensive document evaluation and adherence to agreed terms. The processing time can vary from days to weeks, depending on communication efficiency and document exchange.

By involving banks as intermediaries, they mitigate the risk of non-payment or non-delivery of services by ensuring that funds are held in escrow until specified conditions are met.

Letters of credit are frequently utilised in international trade, especially for sizable transactions or when enhanced financial security is desired. They are preferred by businesses operating in regions with limited payment infrastructure or when trust and assurance play vital roles.

As of 2021, SWIFT has enabled immediate processing between <a href="https://www.swift.com/news-events/news/swift-reports-strong-annual-growth">over 4 billion accounts</a> and 11,000 institutions across more than 200 countries while upholding unmatched security, dependability, and robustness. Thus, businesses prefer to use SWIFT for money transfers and here’s all you need to know about it.&nbsp;

Understanding SWIFT in International Money Transfers

<a href="https://www.skydo.com/blog/why-was-a-certain-amount-deducted-from-my-swift-payment?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">The Society for Worldwide Interbank Financial Telecommunication (SWIFT)</a> is a messaging network that enables global secure and standardised communication between financial institutions.&nbsp;

SWIFT assigns a unique identification code (or the SWIFT/BIC code) to each financial institution, allowing for accurate funds routing. It also utilises the SWIFT message format, which includes various fields containing transaction details. The syntax/interpretation is as follows.

First four characters: the institute code&nbsp;

The Next two characters: the country code

The Following two characters: the location/city code&nbsp;

The Last three characters: these are optional, but organisations use them to assign codes to individual branches.

One required field in the SWIFT message is field 71A, which highlights handling intermediary bank fees.&nbsp;

International money transfers through SWIFT typically take several business days due to factors such as time zone differences, intermediary bank involvement, and potential manual processing steps. The processing time can vary depending on the participating banks and the specific requirements of the transfer.

Additionally, SWIFT transactions involve fees charged by the participating banks. The sender is usually responsible for covering these fees, which can vary depending on the institutions involved, the transfer amount, and the transferring currency.

Payers have three options when making a SWIFT international transfer: SHA, BEN, and OUR. These options determine the distribution of charges between the sender and the recipient.

Deciphering these options is crucial to understanding the cost-sharing arrangement and making an informed decision based on the transaction value, relationship with the counterparty, and cost considerations.

However, once these transactions are successful, you need to ensure tax compliance with the FIRA/FIRC document.

<a href="https://www.skydo.com/blog/automated-firc-simplifying-international-payments-compliance">FIRA (Foreign Inward Remittance Advice)</a> and <a href="https://www.skydo.com/blog/all-you-need-to-know-about-FIRC-a-complete-guide?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">FIRC (Foreign Inward Remittance Certificate)</a> are vital documents in international business transactions. They are often used interchangeably to refer to documents that serve as proof of inward remittance.

This document provides details such as the beneficiary, remittance amount, and purpose of payment. These documents are essential for maintaining transaction records, ensuring compliance with applicable laws, and facilitating the monitoring and regulation of foreign exchange transactions.

While FIRA and FIRC may have slight differences in terminology and format depending on a country's specific banking practices or regulatory requirements, their primary purpose remains – to provide evidence of foreign inward remittances receipt.

Per the <a href="https://rbidocs.rbi.org.in/rdocs/notification/PDFs/11MDEGS1205163428383952204B77831A3A086E82FDDF.PDF">RBI rulebook on the Export of Goods and Services</a>, “AD bank should be satisfied with the bona fides of the transaction and export documents, such as export invoice / FIRC”. Additionally, “Further, AD Category – I banks need to report the electronic FIRC to EDPMS wherever such FIRCs are issued against inward remittances.”

Skydo simplifies obtaining GST-compliant FIRA and LUT by allowing you to download this vital document from its online platform, eliminating manual paperwork, streamlining the submission process, and ensuring compliance with GST regulations. This convenience and efficiency save time and resources, allowing you to focus on core activities and improve operational efficiency.

The Importance of Letter of Undertaking (LUT) in International Transactions

The <a href="https://www.skydo.com/blog/everything-you-need-to-know-about-lut?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Letter of Undertaking (LUT)</a> holds significant importance for GST-compliant-registered businesses supplying services outside India. LUT is a document that exempts your company from paying GST on export services and allows for a smooth flow of transactions. It serves as a legal undertaking by the exporter to fulfil specific obligations and comply with GST regulations.&nbsp;

Obtaining a valid LUT is essential for businesses engaged in international transactions as it enables them to provide services without charging GST, making their offerings more competitive in the global market. Failure to provide a valid LUT may lead to unnecessary <a href="https://www.skydo.com/blog/gst-format-matters-heres-why-and-what-it-includes?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">GST liability</a> and compliance issues, impacting the financials and overall business operations.

Navigating the complexities of international transactions requires careful consideration of various factors, such as costs, fees, tax implications, payment methods, and regulatory compliance. Deciding whether to invoice in INR or a foreign currency can significantly impact a business's financial management and profitability.&nbsp;

Understanding the role of SWIFT, LUT, FIRA, and FIRC in international transactions is essential for businesses engaged in cross-border trade. By comprehending these concepts and their interplay, you can streamline payment processes, minimise costs, ensure tax compliance, and establish healthier financial controls.&nbsp;

Q1. What is a valid currency for an invoice in India?

Ans: In India, an e-invoice for export must be issued in Indian Rupees (INR) as the official currency. Foreign currencies are not accepted for domestic transactions, ensuring compliance with the country's legal and financial regulations.

Q2. Could I prepare an invoice using any currency in an export business?

Ans: Yes, in the export business, invoices can be prepared using any internationally recognised currency. This flexibility allows exporters to adapt to the preferences and regulations of their international clients.

Q3. Do exporters want to invoice in the importers' currency?

Ans: Exporters often prefer invoicing in the importers' currency to simplify transactions and accommodate the preferences of their international clients. It helps in avoiding currency exchange rate uncertainties and making transactions more transparent.

Ans: An export invoice is a document issued by a seller to an international buyer detailing the products or services sold, their quantities, prices, and other relevant information. It serves as a formal request for payment and is a crucial document in international trade and compliance.

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In early-stage startups, pursuing greatness often begins with assembling the right team. However, the journey is not without its challenges.&nbsp;

As a founder or leader, you've likely encountered the exhilarating yet daunting task of implementing recruitment strategies for attracting top talent to your budding enterprise.

Recruitment for startups becomes more of a task as you need to hire individuals who will join a close-knit team and share the same vision, zeal, and passion as you and others. They will primarily impact your company’s culture and growth.&nbsp;

Hiring, as such, remains one of the critical factors for the success of any startup.&nbsp;

In contrast to large established companies, early-stage companies face challenges such as employees to take on multiple roles, adapt to uncertainty, and be flexible in their job functions.&nbsp;

Startups may also lack experienced managers and mentors, limiting guidance and career development opportunities.&nbsp;

Let’s explore a few effective strategies early-stage startups, like yours, can use for selecting the right candidates.&nbsp;

Startup recruitment is finding, evaluating, and onboarding individuals for your business. It encompasses attracting, screening, interviewing, and ultimately selecting candidates who align with a startup’s unique needs and growth trajectory.&nbsp;

The goal is to build a team that can push the company forward. This comprehensive approach to hiring is crucial for startups to secure talent that contributes to their agility and success in the ever-evolving entrepreneurial ecosystem.

The Importance of Hiring the Right Candidates for Your Startup

Hiring the right candidates is paramount for startup success. Exceptional talent drives innovation, productivity, and a positive company culture. In a startup, each team member significantly influences the company's growth plan.&nbsp;

The right recruits bring diverse skills, adaptability, and a shared vision, contributing to a collaborative and resilient workforce. Conversely, a mismatched hire can disrupt momentum and hinder growth.&nbsp;

Startups are short on budget and cannot divert a significant chunk of the funds to just the hiring process alone. Skill shortage is real and early-stage are worst affected by it. A Capgemini report found that<a href="https://www.linkedin.com/pulse/overcoming-challenges-attracting-right-talent-startup-mosseline/"> 54% of global organisations</a> are affected by skill shortages.&nbsp;

In this quest, another challenge looms large: the dilemma of choice. As you sift through a pool of impressive candidates, each possessing a unique blend of skills and potential, you're faced with a pivotal decision: how do you choose among several equally suitable candidates? Who will be the ideal addition to your startup?&nbsp;

Let’s explore eight effective strategies early-stage startups like yours can use for selecting the right candidates.&nbsp;

Building a brand is more than just a logo; it's the essence of your company's culture and values. This strategy sets you apart in the competitive job market.&nbsp;

To create a strong employer brand, showcase your company's values, mission, and workplace culture authentically. Craft compelling employee stories, sharing their experiences and growth within the organisation.&nbsp;

For instance, we asked our team members <a href="https://www.linkedin.com/posts/skydo-official_skydoturnsone-team-skydo-activity-7126074950326648834-fQqP?utm_source=share&amp;utm_medium=member_desktop">what they loved about working at Skydo</a> and posted that video on LinkedIn.

Similarly, you could leverage social media platforms to humanise your brand, providing a behind-the-scenes look at your company's daily life. Encourage employee testimonials, emphasising the positive aspects of working for your organisation.

Start by understanding your ideal candidates' demographics, such as age, education, and experience. Dive into their psychographics, exploring values, motivations, and career goals. Consider their preferred communication channels and technology usage. Factor in job-seeking behaviours and challenges they may face.

Use this data to craft detailed personas, giving each a name and a narrative. For example, meet "Tech-Savvy Amit," a mid-level developer passionate about innovation. Tailor your recruitment strategies to resonate with each persona, ensuring a personalised and effective approach. Regularly update personas to adapt to evolving workforce trends and maintain a competitive edge in talent acquisition.

When explaining the job profile to a candidate, you must discuss the positive work environment at your company and how you develop a learning mindset in your employees.&nbsp;

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The interview process in a startup differs from that of a large corporation. The interviews are less structured, more specific, and less formal. Often, it is the <a href="https://www.skydo.com/blog/what-is-your-role-as-a-founder-in-creating-a-successful-tech-startup?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">founder or CEO</a> interviewing candidates rather than an HR-based interview spread across several rounds.&nbsp;

Given their unique work cultures and role dynamics, startups remain a fascinating choice for fresh graduates. Candidates have better growth prospects and can learn to perform in high-stress environments. They know their role will be more critical than any invisible desk at a large corporation.&nbsp;

Keeping these factors in mind, founders should devise standardised interview rounds flexible enough to accommodate the specific needs of their startup.

The stakes are increasingly high for startups. Therefore, taking care of the introduction call helps build the right impression before the prospective candidate. The introduction call should be clear, brief, and impactful.&nbsp;&nbsp;

Highlight your startup’s core strengths and unique things when you give an overview. Be transparent about the role and compensation structure. Be open to discussion once you define the hiring process and timeline for the candidate.&nbsp;

Employ a case-interview format in your recruiting processes. Ask candidates to solve a business problem to evaluate their problem-solving skills and customer orientation. Such interviews can play a decisive role in your hiring process as they test a candidate’s problem-solving and soft skills.

5. Build a Robust Recruitment and Selection Process

Building a robust recruitment and selection process involves strategic steps after you receive an application. Begin by narrowing down the applicant pool and shortlisting top candidates for the interview phase. Next, design an interview process tailored to your company's needs, moving beyond traditional question-answer sessions.

Here are a few tips for your selection process.

The “X factor” is that indefinable quality that makes a candidate shine before the critics or examiners. For instance, Steve Jobs had an X factor of leadership that helped him reshape and change the course of the world.&nbsp;

Certain candidates possess qualities that align exceptionally well with the company's values. The best-fit candidates with the X factor are what you should look out for in your hires. Moreover, the right candidate will exhibit passion in the workplace, simplify complexity, consider the bigger picture, and prefer working together in teams.&nbsp;&nbsp;&nbsp;

Startups are well-positioned to offer candidates a working relationship where they can explore their abilities and contribute significantly to the firm. Reciprocally, a startup recruiting process may involve the interviewer asking What X factor a candidate has makes them stand out from the many candidates.



<a href="https://www.skydo.com/blog/mastering-compliance-a-step-by-step-guide-to-data-protection-payments-laws-and-industry-regulations-for-tech-exporters?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Ensuring legal compliance</a> is crucial for businesses to operate confidently and successfully. It requires a thorough understanding and consistent monitoring of applicable laws, regulations, and industry standards, both domestically and internationally.&nbsp;

Regular audits and assessments are essential to proactively identify and address potential non-compliance issues, ensuring the business complies with the law.

Companies should establish robust internal policies, educate employees, and provide ongoing training to promote adherence to legal frameworks. Collaboration with legal experts and staying updated on evolving legislation is crucial. Proactive measures, transparent communication, and a dedicated compliance team contribute to a culture of legal responsibility, safeguarding the organisation from potential legal problems.

8. Leverage Technology for Startup Hiring

Hiring for startups can be revolutionised by leveraging technology. Utilising applicant tracking systems streamlines candidate sourcing, screening, and communication. Automated interview platforms like <a href="https://www.hirevue.com/">HireVue</a> facilitate remote assessments, <a href="https://www.skydo.com/blog/effective-time-management-techniques-for-business-owners?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">saving time</a> and increasing efficiency. AI-driven tools analyse resumes, ensuring a data-driven approach to candidate selection.&nbsp;

Social media platforms aid in targeted recruitment campaigns expanding reach. Collaborative tools enhance team evaluations, fostering a cohesive hiring process.&nbsp;

A successful hiring process won’t just ask candidates about their capabilities. It will also tell them what the organisation has to offer for them. The right candidate is not the one with the best skills but who carries the passion to take your vision forward and is ready to contribute their efforts collectively in alignment with the company culture.&nbsp;

A startup's recruiting strategies must be centred around the candidates. Selecting candidates with a learning mindset juxtaposes their success with the growth and success of the startup. Hence, align individual goals with organisational objectives while framing the narrative of your recruiting strategies.&nbsp;

An apt candidate would be adaptive, eager to learn, and aware of their strengths and weaknesses. Incorporating these three touchpoints in your interview – self-awareness, learning mindset, and happiness – can foster a better candidate-interviewer relationship. A sense of trust and the hope of building a great career can drive and retain many great talents in your organisation.

Heads up: <a href="https://www.linkedin.com/posts/srivats80_hiring-in-fintech-four-short-stories-from-activity-7113744627471437824-pHBI/?trk=public_profile_like_view">Click here</a> to get insights from Skydo’s founder and learn how he built a solid team from scratch.

Q1. How do I hire the best talent for startups, or how to hire employees for a startup?

Ans: To secure top talent for startups-

Q2. How do you scale hiring for an early-stage startup?

Ans: Scaling hiring for an early-stage startup requires a proactive approach.&nbsp;

Q3. What strategies do you utilise to attract top talent to a program?

Ans: Attracting top talent involves showcasing the startup's unique value proposition.&nbsp;

Q4. How do you ensure that you are hiring top talent?

Ans: Ensure top talent acquisition by implementing a meticulous recruitment and selection process. Define clear job roles and requirements, conduct thorough interviews, and incorporate practical assessments. Leverage employee referrals, check references diligently, and utilise technology for efficient screening. Regularly evaluate and adapt the hiring process to maintain its effectiveness.

Q5. What are the top 5 sourcing techniques?

Ans: Leverage social media platforms, industry-specific job boards, employee referrals, networking events, and partnerships. Incorporating these strategies broadens the candidate pool, ensuring a mix of experienced and fresh talent suitable for the startup environment.

Q6. How can startups attract top talent on a budget?

Ans: Startups on a budget can attract top talent by emphasising intangible benefits such as a collaborative work environment and career growth. Leverage cost-effective recruitment channels, such as social media and networking events. Showcase the startup's innovative projects and unique culture to appeal to candidates seeking meaningful work experiences over traditional perks.

8 Recruitment Strategies for Top Talent for Startups

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Every entrepreneur dreams of scaling their business beyond domestic boundaries. A <a href="https://www.skydo.com/blog/eight-point-guide-to-take-your-service-business-global">global presence</a> for a business is a crucial step towards heightened profitability. However, achieving this profitability relies on invoicing with a suitable currency exchange rate.&nbsp;

Navigating the complexities of <a href="https://www.skydo.com/blog/should-i-invoice-in-inr-or-foreign-currency?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">foreign currency invoices</a> is critical to businesses that transact internationally to ensure regulatory compliance and transparent accounting.&nbsp;

Additionally, when there are many diverse currencies to consider during invoicing, exchange rate risks can be a significant challenge, impacting your business's financial stability and profitability.

This blog explains how to choose the right currency exchange rate to invoice international customers.

Exchange Rate Options for Foreign Currency Invoices

The exchange rate effect determines the amount you receive for the work done for a foreign client. However, as the currency exchange rate fluctuates frequently, determining the right invoice amount could be the difference between making a profit or an absolute loss for the work done.&nbsp;

There are two ways to decide on an estimated exchange rate to help you break even or profit from the work done for a foreign client.

This exchange rate applied to your foreign currency invoice is the rate on the day you send it to the client. The current exchange rate reflects the amount you will receive in your local currency if you charge this amount in your invoice for that specific day.&nbsp;

Let's say your business sells a service to an international customer for 100 Euros on September 1st. That day, the exchange rate was 1 Euro to INR 89. Your invoice would show the equivalent value as INR 8,900.

The Pros of this currency exchange rate option include–

The Cons of this currency exchange rate option include–

The average currency exchange rate involves calculating an average rate over a specific period, which could be a day, week, month, or any custom-defined time frame. This approach smooths out short-term fluctuations in exchange rates.

Suppose your business enters into a year-long contract with a foreign client. To determine the exchange rate for invoicing for the entire year, you calculate the average rate over the previous month. If the average rate is 1 USD to INR 80, you'll invoice transactions accordingly.

The Cons of this currency exchange rate option include–

Choosing between these two exchange rate options depends on your specific needs, risk tolerance, and the nature of your international transactions.&nbsp;

The current exchange rate is suitable for those who require real-time values, while the average exchange rate is a better choice for long-term financial planning and stability, particularly when dealing with international partners and long-term contracts.

However, businesses must consider additional factors before choosing between the current and average currency exchange rates as specified below.

Factors Influencing Currency Exchange Rate

Currency exchange rates fluctuate based on demand and supply, trading volumes, and many other parameters. These dynamic market factors create a chain reaction resulting in currency exchange rates fluctuating in real-time.&nbsp;

Foreign currency transactions are one-time, limited-time, and regular. Each type influences exchange rate choices, contributing to accounting and financial prospects.&nbsp;&nbsp;

For example, as an Indian tech service exporter, you offered a one-time software development project to a U.S. client. In this case, it is a one-time foreign currency transaction, and the choice of exchange rate can influence the project's profitability and financial records.

Businesses may have to comply with specific regulations and accounting standards when dealing with foreign exchange. Relevant accounting bodies such as the <a href="https://www.ifrs.org/">International Financial Reporting Standards (IFRS)</a> have created respective foreign exchange guidelines under <a href="https://www.rbi.org.in/scripts/Fema.aspx">FEMA</a>.&nbsp;

Furthermore, companies also have to adhere to <a href="https://www.ojp.gov/sites/g/files/xyckuh241/files/media/document/GAAP_Guide_Sheet_508.pdf">Generally Accepted Accounting Principles (GAAP)</a> for foreign currency accounting. These standards and regulations can impact the choice of exchange rate for financial reporting and taxation purposes.&nbsp;

180 currencies circulate in 197 countries worldwide. Some currencies, such as USD or EUR, are stable compared to AUD or JPY.

Highly volatile currencies are riskier to hold, and companies may choose the average currency exchange method to mitigate the negative effect of the volatility. However, low-volatility currencies are ideal for real-time conversion through currency exchange rates.&nbsp;

4. Company policy and risk tolerance&nbsp;

Companies with a low tolerance for exchange rate risk may opt for strategies that minimise risk, such as using average exchange rates.

In contrast, companies with higher risk tolerance may take more chances with spot rates. Furthermore, some companies may have agreements with foreign suppliers or customers to use a specific average exchange rate for invoicing.



Best Practices for Choosing an Exchange Rate Approach

Choosing the right exchange rate is crucial for businesses dealing with <a href="https://www.skydo.com/blog/transforming-your-invoicing-experience-with-skydo?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">invoicing in foreign currencies</a>. The choice between the current currency exchange rate and the average currency exchange rate should align with the specific business needs.&nbsp;

It should also conform to internal policies to ensure that the business minimises currency exchange risk. Additionally, it ensures that conversions occur at the most favourable exchange rate.

Here are some best practices to consider before choosing the exchange rate before you learn how to invoice customers: 



How to Mitigate Currency Exchange Rate Risk

Companies must create and execute policies/activities to mitigate the <a href="https://www.skydo.com/blog/how-skydo-increased-success-rate-on-international-payments?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">currency exchange risk</a>. Here are several strategies and techniques to achieve this objective.

How to Create an Invoice with the Right Currency Exchange Rate

You can also leverage <a href="https://dashboard.skydo.com/new-invoice/1995?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Skydo’s free invoicing tool</a> to create an international invoice in under 2 minutes.&nbsp;

Additionally, <a href="https://fx-calculator.skydo.com/comparison?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Skydo’s FX calculator</a> provides live currency exchange rates without any added margins, ensuring that you receive the optimal price for your global invoices through our payment platform.

International transactions are vital for businesses with a global presence. However, fluctuations in exchange rate effects can impact your venture’s profitability and financial stability. Therefore, you must choose between an effective exchange rate approach to streamline your foreign currency invoices and the resulting currency conversion.

Understand the affective factors, the types of available currency exchange, and the factors you should consider before choosing between the two currency exchange options.&nbsp;

Q1. How Do Exchange Rates Affect International Trade?

Ans: Exchange rates impact international trade by changing the relative costs of goods and services between countries. A strong domestic currency can make exports more expensive, while a weak currency can boost exports but increase the cost of imports. This affects trade balances and competitiveness.

Ans: To invoice as an LLC, create professional invoices with your company's name and address, itemise goods or services provided, specify payment terms, and send them to clients.

Ans: International invoicing involves creating invoices for goods or services provided to clients in foreign countries while meeting their distinct requirements and regulations to ensure compliance.

Q4. How do I make international invoices?

Ans: To create an international invoice, use your company's details, specify services and prices, add currency exchange rates, and ensure compliance with international tax regulations. Once you review all the details, send it to your client and follow up.

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“Macha, that’s where the money is!” When business owners like you hear this, you may wonder if you’re doing the right thing, serving only domestic clients. Whether it is looking at the LinkedIn posts of our ex-boss who took a new job role in Singapore or Instagram stories of batchmates who started their careers in Silicon Valley, working with global clients has its allure.

The reason to pursue this can be many: financial reward, exposure to newer learnings, or simply the sheer thrill of venturing into newer markets. Irrespective of your motivation, expanding your service business globally is a huge step.

Many Indian businesses are going global - both small and big. It includes multi-billion dollar corporations like <a href="https://www.infosys.com/">Infosys</a> and <a href="https://www.tcs.com/">TCS</a> to newer SaaS startups like <a href="https://vymo.com/">Vymo</a> (which is serving 65+ global corporations with 3,00,000+ users). Moreover, Indian businesses are adequately equipped to serve a global clientele.&nbsp;

We have a large, English-speaking, young workforce, proficient in IT and relatively cheaper than our Western counterparts. Indian service exports hit <a href="https://theprint.in/economy/indias-service-exports-hit-all-time-high-of-273-6-bn-in-2022-outlook-is-rosy-too/1302305/">$273.6 billion in 2022</a> and are set to cross <a href="https://economictimes.indiatimes.com/news/economy/foreign-trade/indias-goods-services-exports-may-cross-usd-750-bn-this-fiscal-piyush-goyal/articleshow/98414673.cms">$750 billion in 2023</a>. Additionally, over 63 million MSMEs in India already contribute to about <a href="https://economictimes.indiatimes.com/small-biz/trade/exports/insights/etrise-top-msmes-21-making-india-competitive-globally-through-exports/articleshow/86253693.cms?from=mdr">40% of India’s overall exports</a>. This means that you have an immense opportunity to grow and serve international clients.&nbsp;

It's a decision that can bring immense opportunities but also some hard challenges. The world is full of stories of businesses that failed to go global. However, there are also stories of businesses that successfully expanded globally and transformed into global giants.

This easy-to-follow, eight-point checklist especially for Indian service export businesses will guide you through your first phase of global expansion and help you overcome challenges related to your global business strategy.&nbsp;

These tips have been curated based on years of experience working with service businesses like yours, helping them expand globally.

1. Understand your service and your target audience for going global

What are the factors leading to your business’s success in the domestic market? You need to identify your service business’s unique attributes and selling points against your competitors.&nbsp;

If you’re a software development company selling imaging software to the healthcare industry, you can tailor your marketing efforts to target potential customers in the global healthcare industry.

Break them down and ask these questions if they must be adapted to the global audience.

Moreover, apart from understanding your market-specific aspects, you also need to analyse that country’s overall economic and political scenario. This can be done by analysing their GDP, inflation rate, political stability, international relations with your country and level of business-friendly environment provided by the country.&nbsp;

These will ensure you balance between short-term and long-term opportunities that a country provides. For example, a country that provides generous incentives to help businesses become technology-ready could be a lucrative opportunity for an IT services company.&nbsp;

2. Position your service business to your target audience

Growing Global

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