Resources·for SMEs
Multi-currency AR: the SME's silent margin killer
How receivables in foreign currencies quietly erode margin between invoice date and collection date, and what to track to actually see it happening.
An SME with export customers, such as a Turkish client paying in lira, a UK customer paying in sterling, and a US buyer in dollars, is exposed to currency movement on every invoice from the moment it's raised to the moment it's paid. Most businesses never quantify this exposure. It shows up, if at all, as an unexplained gap between the margin the sales team quoted and the margin that actually landed. By then it's buried in a P&L line nobody investigates closely.
The mechanics aren't complicated. Seeing them clearly just requires tracking a couple of extra numbers that most AR reports leave out.
The three places margin actually leaks
FX drift between invoice date and collection date
You price and invoice at today's exchange rate. Payment terms of 30, 60, or 90 days give the currency plenty of time to move before cash actually arrives. It moves in both directions, not always against you, but rarely tracked either way.
Hidden bank conversion spreads
The rate your bank actually applies when converting an incoming foreign payment is rarely the mid-market rate quoted in financial news. The spread, often 1-3%, sometimes more, is a real cost that almost never appears as its own line item. If FX volume is material, it's worth raising directly with your relationship bank. The same conversation covered in what your Hausbank actually checks often extends to negotiating a better spread, not just the credit line itself.
Aging that looks fine in local currency and isn't in EUR
A receivable that hasn't grown in lira terms can still represent a shrinking EUR value if the currency has depreciated over the same period. The aging report shows no problem while the actual recoverable value quietly falls.
A worked example
An invoice for 500,000 TRY, raised with 60-day payment terms, where the lira weakens against the euro before payment arrives:
| Event | TRY amount | Rate (TRY/EUR) | EUR value |
|---|---|---|---|
| Invoice raised | 500,000 | 35.0 | 14,286 |
| Payment received (60 days later) | 500,000 | 38.5 | 12,987 |
| FX loss on this invoice | - | - | -1,299 |
Just over 9% of the invoice's original euro value, lost entirely to currency movement over a single 60-day collection cycle, before any bank conversion spread is even applied on top.
What good multi-currency AR tracking looks like
- -Every invoice recorded in its original currency, alongside its EUR equivalent at invoice date
- -The EUR amount actually received recorded separately, at the rate that applied on collection
- -The FX gain or loss on each invoice calculated explicitly, not left buried in a general FX line
- -AR aging reported in both original currency and EUR, so a shrinking EUR value is visible even if the local-currency balance looks unchanged
- -Bank conversion spreads tracked as their own cost line, not netted invisibly into the amount received
Visibility is the first step, not the whole solution. Once the exposure is visible invoice by invoice, hedging it, such as forward contracts, multi-currency accounts, or invoicing in your own currency where customers will accept it, becomes a separate decision worth having with your bank or a treasury advisor. None of those tools help if you can't see the exposure clearly first.
See the FX impact per invoice, not buried in the P&L
AHQ Financials tracks receivables in their original currency alongside their EUR equivalent, so FX gains and losses on every invoice are visible, not discovered months later in an unexplained margin gap.