We have looked in previous chapters at the key elements of a domestic invoice. But when British businesses begin trading abroad or dealing with overseas customers, things become more complicated.
The first consideration when invoicing a foreign customer is where they are based. Roughly half of the UK’s trade is with the European Union (EU), though more companies are setting their sights on markets further afield now Brexit is on the horizon. Wherever your customer is, you must agree with them the currency in which you will invoice and in which they will pay.
When issuing invoices to foreign customers, businesses often work in commonly-used currencies, such as euros, dollars or sterling, to minimise complication. The advantage of invoicing and being paid in pounds is that there is no exchange rate risk. However, foreign customers may prefer to pay in their own currency. Most small businesses billing in a foreign currency hedge against currency risk by getting forward cover (also known as Forward Exchange Contracts) from their bank. This locks in the current exchange rate, so they won’t lose if the rate moves against them while they’re waiting for payment.
In most instances, issuing an invoice is a requirement - EU rules, for example, dictate that an invoice must be produced whenever you sell goods, offer services or receive payment on account. This can be done electronically or on paper, with all countries in the EU required to treat electronic and paper invoices as equal. But emailing international invoices makes good sense for reasons of speed, plus avoiding possible mistakes in postal addresses.‹ View table of contents Next page ›