Are you an agency working with international clients? This guide will help you avoid hidden fees and save money. Potentially more than $100 for every $1,000 you earn.

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Understanding Currency Exchange Rates and Optimism

Many agencies work with clients from different countries, often needing to invoice in various currencies. Let’s say I’m a marketing agency based in Canada, and my clients are mainly in the US, UK, and Europe, which means I often bill in USD, GBP, and euros. You’d think checking the latest currency exchange rates with the Bank of Canada and invoicing based on those rates would provide an accurate estimate of my earnings.

Unfortunately, that’s not the case.

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The Reality of Currency Conversion

Let’s delve into an example. Imagine it’s invoicing day, and I have three clients to bill - one for $1,000 USD, another for £1,000 GBP, and another for €1,000 EUR. According to the Bank of Canada, the exchange rates are:

• 1 USD = 1.3809 CAD

• 1 GBP = 1.7735 CAD

• 1 EUR = 1.4949 CAD

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Based on these rates, I expected to receive:

• For $1,000 USD, I expect 1380.9 CAD.

• For £1,000 GBP, I expect 1773.5 CAD.

• For €1,000 EUR, I expect 1494.9 CAD.

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However, The Bank of Canada provides the interbank exchange rate, which is not the rate you actually get when exchanging currency. Even if a bank claims to have no fees, they often apply a heavily marked-up exchange rate, reducing the amount you receive.

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PayPal - Transparent But Costly

There is an additional fee to receive funds, but let’s focus on the exchange rate itself. PayPal is straightforward about its exchange rate calculation. However, estimating your final payout requires an active account. Using PayPal’s conversion tool:

• $1,000 USD (excluding transfer fees) becomes 1,324.8 CAD.

• £1,000 GBP (excluding transfer fees) becomes 1,708.8 CAD.

• €1,000 EUR (excluding transfer fees) becomes 1,440 CAD.

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This is significantly less than the interbank exchange rate would suggest. There would also be a transfer fee taken off leaving you with < $1,000 before the conversion begins.

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International Bank Transfers - Beware of Flat Fees

RBC charges a flat fee for receiving any wire transfer over $50 CAD or $50 USD or €37 EUR or £30 GBP. Additionally, they use their own exchange rate, which often differs from interbank exchange rates.

• My $1,000 USD (excluding transfer fees) becomes 1,337.7 CAD.

• My £1,000 GBP (excluding transfer fees) becomes 1,735.4 CAD.

• My €1,000 EUR (excluding transfer fees) becomes 1,448.4 CAD.

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Although better than PayPal, this is significantly less than the interbank exchange rate would suggest. There would also be a transfer fee taken off leaving you with < $1,000 before the conversion begins.

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Vault - A Game-Changer for Agencies

Vault charges a 0.45% fee on the free plan and that’s it, no surprises. Making the receipt of international payments more accurate when compared to other services.

• $1,000 USD becomes 1,369.3 CAD

• £1,000 GBP becomes 1,734.7 CAD

• €1,000 EUR becomes 1,467.7 CAD

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With Vault’s local currency accounts, I can also receive payments directly in various currencies, avoiding the hassle of currency conversion fees. After signing up and verifying my Vault account, I have local bank details and my clients pay me for free. Giving me control over my finances. I can transfer money directly to my Canadian bank account or switch between currencies within my Vault account.

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Three Key Takeaways

1. Always Scrutinize the Numbers: Currency exchange rates and fees significantly impact your earnings. Ensure you account for these when setting your rates.
2. Consolidate Invoices When Possible: Smaller invoices often incur higher fees proportionally. Consider billing monthly instead of weekly, or adjusting your rates for smaller projects.
3. Leverage Vault’s Services: Vault offers best-in-class rates for agencies, helping you maximize your income and avoid unnecessary losses. Don’t overlook your money transfer options - make informed choices to optimize your agency’s income.