Since January, the U.S. dollar has dropped nearly 6 percent against the euro. And a volatile foreign currency exchange rate means planners might pay more for hotel rooms, ground transportation, and other services for many European events.
Foreign currency transactions can have a big impact on the bottom line. In the last year, one euro has been worth as much as $1.10 and as little as 86 cents. In other words, a one-million-euro meeting budget would have been worth as much as $1,090,000 and as little as $860,000 — a $230,000 difference!
To protect yourself against fluctuations, consider using a forwardto help minimize your currency exposure. With a forward contract, you purchase a specific currency amount for a specific date at an agreed-upon price.
Forwardcan be bought and sold against the U.S. dollar, allowing you to cover both foreign payables and receivables. This is helpful when you contract with a convention center and need to make a series of deposits spread over the year prior to the meeting. And a forward contract can help you secure a rate that is guaranteed until the funds are due. You'll know your costs and eliminate the risk of currency fluctuation eroding your profit margin.
Experienced planners often purchase blocks of funds when the exchange rate is favorable. By placing the funds in a foreign currency holding account, they can draw on the funds as necessary. These accounts are often used in conjunction with forward contracts when only a portion of the funds is needed on a particular date.
For planners conducting transactions in the spot market, wire transfers are the most immediate way to deliver funds. Whether you're paying invoices or funding foreign accounts, sending funds in the recipient's currency lets you decide when to convert your funds. Receiving funds in the currency of your foreign associates allows you the same option.
Whatever your exposure may be, contact your foreign exchange supplier to review your strategies and update your international financial procedures. In these uncertain economic times, it makes sense to protect your budget from the weaker dollar.
Laura Moore-Solano is a senior account executive in the Washington, D.C., office of Ruesch International, afinancial institution that specializes in international payment services.
VAT is this?
- Value-Added Taxes
VAT assessed on certain costs related to international meetings and incentives can be steep — as much as 25 percent in some countries. Often, you can recover a portion of those charges. But you need to know the procedures before your event.
- Which countries charge VAT?
Most European countries, some Asian countries, Canada, and South American countries. Not all countries refund VAT to U.S. companies, and the percentage refunded varies.
- What's taxed?
Varies by country. The costs usually taxed include site fees, room rentals, catering, equipment rental, shipping, labor, hotel rooms, meals, professional fees, car rental.
- Who's eligible to reclaim VAT?
Any taxable corporation outside the country where the claim is being filed. Independent planners must be sure that all charges are billed directly to the client company, says Staci Krell, New York City-based vice president of Meridian VAT Reclaim, A Profit Recovery Group International Company. A nonprofit association that charges an attendee-registration fee might, in some countries, have to register for VAT, add it to the registration fee, and report the difference between the VAT it charges and the VAT it pays. Check with a VAT reclaim company to be sure.
- What's the reclaim procedure?
Original invoices only, with proof of payment, must be submitted with a VAT reclaim form; credit card receipts are not acceptable. Invoices must be in a style acceptable to VAT authorities. The form must be completed in the local language. Each country has a reclaim deadline.