Multi-Currency Quotes: Exchange Rates and Currency Risk

Your customer wants a price in dollars. One supplier quotes in euros, another in pounds, a third in dollars. Multi-currency quotes like this are everyday work for distributors, and they hide two risks: comparing prices that aren't really comparable, and losing margin when the exchange rate moves between your quote and your payment.

The short version: quote in one currency, convert every supplier price at the rate you expect to pay (not today's headline rate), use one rate per currency for the whole quote, and protect yourself against the rate moving before you pay.

1. Decide the currency of your quote

Usually your customer decides: they want to pay in their own currency. Whatever it is, the whole quote is in that one currency. Every supplier price gets converted into it before you compare or price anything.

If you can choose, consider quoting in the currency you'll pay your main supplier in. Then the currency risk sits with your customer instead of with you. Many customers won't accept that, but for large orders from a single foreign supplier it's worth asking.

2. Use the rate you'll actually pay

The rate you see in a search engine or a currency app is the mid-market rate: the midpoint between buying and selling. You won't get it. Your bank or payment provider adds a spread, and often a fee per transfer.

So convert supplier prices at your rate: what your bank charged on your last payment in that currency is a good starting point. On a $10,000 purchase, a 1.5% difference between the headline rate and your real rate is $150 that comes straight out of your profit.

Use one rate per currency for the whole quote. If line 3 uses 1.08 and line 12 uses 1.09 for the same currency, your comparison is skewed and nobody can retrace your numbers later.

3. Account for the rate moving

You quote today. Your customer accepts in two weeks. You pay your supplier 30 days after that. The exchange rate will be different by then, in one direction or the other.

Example (illustrative figures). Your supplier quotes €10,000. Today €1 costs you $1.08, so your cost is $10,800. With a 12% markup you quote $12,096, a profit of $1,296 (a 10.71% margin).

By the time you pay, the euro has risen to $1.12:

A 3.7% move in the rate took 31% of your profit. Common ways to protect yourself:

• Build a buffer into the rate. Convert at, say, 1.10 instead of 1.08. If the rate stays put, the buffer is extra margin; if it moves against you, it absorbs some of the move.
• Keep validity short. "Prices valid for 7 days" limits how far the rate can drift before your customer accepts.
• Pay your supplier soon after your customer confirms, or buy the currency then, so the rate is fixed early.
• Quote in the supplier's currency where the customer accepts it (see step 1).

None of these is free, and which ones fit depends on your margins, your order sizes and your bank. The point is to decide deliberately, not to find out when the supplier's invoice arrives.

4. Make the currency obvious on the quote

State the currency on every price, or at least clearly at the top and on the total, using unambiguous codes (USD, EUR, GBP) rather than just "$" when your customer might be in Canada or Australia. Ambiguity about the currency is a dispute waiting to happen.

Common mistakes

• Comparing raw numbers across currencies. 18.20 in EUR is not cheaper than 19.50 in USD until you convert both.
• Using the headline rate. Your real rate is worse.
• Different rates for the same currency within one quote.
• Forgetting transfer fees on payments to foreign suppliers.
• Long validity on a thin margin. The thinner your margin, the less rate movement it takes to wipe it out.

Doing this in RFQ Manager

• Every document has its own currency. RFQs, Sub-RFQs, supplier offers and proposals each carry a currency code. When you record a supplier's offer, it starts with the Sub-RFQ's currency, and you change it to whatever the supplier actually quoted in.
• Your proposal is in your RFQ's currency. In Proposal Studio, offers in another currency are flagged, so a EUR price isn't mistaken for a USD one.
• You set the rate. There is no automatic exchange rate: you enter the rate you expect to pay, buffer included. A rate entered for one currency applies to every offer in that currency on the page, so all your EUR offers are converted the same way.
• The lowest offer is found after conversion. Each line marks the lowest converted cost, after the supplier's discount. Until every offer on a line has a rate, nothing is marked, and the line tells you which currency still needs one.
• The rate is saved with each proposal line, so months later you can see which rate you priced with.
• You order in the supplier's currency. A purchase order raised from a supplier's offer keeps that offer's currency; nothing is converted.

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Summary

1. Quote in one currency, usually your customer's.
2. Convert at the rate you'll actually pay, one rate per currency.
3. Expect the rate to move: buffer, short validity or early payment.
4. Show the currency clearly on every price.