Budget exchange rates for supplier payments
Budget each unpaid foreign-currency amount against its expected conversion date. Keep the paid deposit at its actual sterling cost, test the balance under base, weaker-pound and stronger-pound scenarios, and document who approves currency purchases and budget exceptions. Use this payment schedule when briefing Cambridge China Bridge.
Map when the money becomes exposed
Create an exposure register before committing to the order. Record the invoice currency, deposit and balance amounts, commitment date, expected currency purchase dates, payment triggers and latest acceptable payment dates. Exposure starts when you commit to a foreign-currency cost and continues until the currency is bought or its purchase rate is fixed.
Distinguish the supplier payment date from the currency purchase date. Currency bought in advance changes the remaining exposure but also uses cash before payment. Keep the balance conditional on the agreed inspection evidence; use the safe supplier payment guide for payment controls.
Calculate scenarios for the unpaid balance
Choose a base rate and deliberately weaker-pound and stronger-pound rates. Record their source, quotation time and why the adverse case would test your budget. These are planning assumptions, not forecasts. Express every rate as foreign-currency units per pound: divide the foreign-currency payment by that rate to calculate its sterling cost, then add separately charged fees.
After paying the deposit, keep its actual sterling cost unchanged across scenarios. Recalculate only uncovered payments; show already purchased currency and contracted currency separately at their known sterling costs. Add the rows to find total goods cost, then compare the adverse case with the approved budget. The difference is the additional cash allowance to consider.
| Payment position | Sterling calculation | Timing record |
|---|---|---|
| Deposit already paid | Actual sterling debit, including separately charged fees | Actual conversion and payment dates |
| Uncovered balance | Foreign-currency balance divided by scenario rate, plus separate fees | Expected conversion date and inspection trigger |
| Currency already bought or contracted | Recorded purchase cost or contracted sterling cost, plus separate fees | Currency availability and supplier payment dates |
| Scenario total | Add payment costs without counting purchased currency twice | Cash required at each stage |
Turn the scenarios into a currency policy
Write down the budget rate, adverse scenario, acceptable sterling cost and cash reserve. Name the person who maintains the register, who may buy currency and who approves an exception. Set review triggers such as order approval, deposit payment, a changed production schedule, inspection readiness or a provider quote that exceeds the approved cost.
State which approach is permitted: buying when payment falls due, buying currency in advance or arranging a forward contract. A forward fixes a purchase rate but gives up the benefit of favourable movements on the covered amount. Before booking, ask about funding, settlement obligations and the cost of changing dates or cancelling. The forward contract guide covers that decision.
Keep payment and customs calculations separate
Your supplier-payment scenarios use the conversion rates you could actually obtain, including the provider's charges. Maintain a separate customs calculation. HMRC guidance provides for contractually fixed-rate cases; otherwise it requires the published rate applicable when the declaration to free circulation is accepted. Ask your customs agent which treatment fits your contract rather than substituting your payment rate.
Use the customs exchange-rate guide for that distinction and understanding landed price for the wider cost model. Add uncovered foreign-currency freight or other charges to the exposure register as separate payments. Keep currency contingency visible rather than hiding it inside the factory unit price.
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Update the register and close the order
When production slips, update the expected conversion and payment dates without weakening the inspection condition. Check whether purchased currency still matches the unpaid amount and whether a forward still matches the payment window. Ask the provider for amendment terms before accepting a revised delivery plan; do not assume currency arrangements move automatically with the shipment.
At completion, reconcile the approved budget with actual sterling debits, provider fees and unused currency. Separate exchange-rate differences from quantity changes, supplier price changes and freight changes. Retain the policy version, scenario sheet, approvals, provider confirmations and payment evidence together. Use the findings to adjust the next order's assumptions.
Frequently asked questions
Should I recalculate the deposit when exchange rates change?
Keep a paid deposit at its actual sterling cost. Recalculate uncovered payments only. If the deposit is still unpaid, include it as a separate exposure with its expected conversion date.
How much should I allow for exchange-rate movements?
Calculate the unpaid amount at your base and adverse rates, including separate fees. Compare the adverse total with the approved budget and decide what extra cash and margin pressure the business can accept.
Does a sterling quote remove currency risk?
Check whether the sterling price is fixed through the balance payment or can be revised for currency movements. Record its validity, exclusions and adjustment terms before treating the amount as fixed.
What if production is delayed after I book a forward?
Update the payment window and ask the provider about amendment, settlement and cancellation terms. Obtain approval for any extra cost. Keep supplier payment conditional on the agreed inspection evidence.