1. Consider a Forward Contract
To manage the uncertainty of exchange rates, especially with the financial volatility in Europe these days, consider using a forward contract. To do this, you work with your bank or a reputable participant in the foreign exchange (forex) market, and agree to buy a certain amount of a foreign currency at the exchange rate currently prevailing. If the rate goes up by the time you buy the currency (usually six to 12 months later), you’ve successfully managed that risk. If it goes down, you’re still paying what you expected to pay (and presumably budgeted for).
2. Negotiate a Fixed Rate
In this scenario, you work with each of your vendors to agree on a fixed rate of exchange for all of your contracts. This option has some slight risks, as these contracts are usually signed farther in advance than forward contracts, allowing for a wider swing in the actual exchange rate. You can look like a hero if the value of their currency increases against the dollar but you can also look like a fool if it weakens significantly.
3. Credit Card Use
The benefits of using credit cards to pay your bills are convenience and a fair rate. Credit-card companies are known for negotiating lower exchange rates than average, so many groups use credit cards so they don’t have to worry about it. On the other hand, a good negotiator who has studied the rates and the fluctuation history could also get a great rate that may be a little lower. It just depends on how much time and knowledge a group has to focus on it. Be sure to ask each vendor what credit cards they will take before agreeing to services. Also be sure to look into credit-card conversion fees, which can be steep—and/or hidden.
4. Budget in U.S. Dollars
It will have to be converted to U.S. dollars for the audit, and even if you are paying all the bills in local currency, the exchange rate will be what it is on the day that the wire transfer or credit card payment is made.
5. Add a Budget Cushion
Include a line item for currency fluctuation, wire transfer fees, and bank fees of about 10 percent of overall expenses. You probably won’t need to use all of it, but what you don’t spend will fall to your bottom line.
6. Expect to Pay Upfront
Outside North America, the major portion of your meeting cost is expected upfront. Try to hold back 10 percent to 20 percent of the payment so you have some leverage. Some countries (e.g., Taiwan) may want final payment in cash at the end of your meeting.
7. VAT: Don’t go it alone!
Your best chance to get any kind of refund on value-added tax, or VAT, is to work with a reclaim expert. Contact them as soon as you know your meeting country, as you may need prior VAT registration for the reclaim process. Firms include CEI, Meridien Global Services, and Euro VAT Refund Inc.
Note that some countries, such as Mexico and Chile, exempt meeting-related costs from taxes, so get advice from local partners as well. However, VAT paid on expenses related to incentive meetings generally is not refundable.
Read more: Go to Wikipedia, and search for “VAT” to find a chart of every country in the world that has a value-added tax (and there are many acronyms besides VAT), along with the current rates.
Leigh Wintz, CAE, is principal consultant, Tecker International.