[Mike Lewis]

Colin,

I can't answer your question in detail, but I can tell you this: the rate of exchange you see published in the press or on websites is only a small part of the story. What's much more significant is the commissions, fees and handling charges imposed by the banks -- on both sides of the transaction.

For a transaction involving two currencies, you can reckon on losing anything up to 10 percent -- possibly more -- to the banks. You will pay part of that cost yourself. Your customer will pay another part, which means you will either have to lower your price or face being uncompetitive.

My company is probably much smaller than yours, but I've faced all these problems. I do a lot of work for US clients and it was costing me large amounts of money just to pay in their cheques. My solution was to open an account with an American bank. I now pay all my dollar receipts into that account, and use it to finance USD purchases and expenses. That way, there are no bank charges (other than normal current account charges) and no worries about losing money on a particular transaction because of exchange rate fluctuations.

But however you decide to physically handle the currencies, there is also the issue of how the "gain and loss on exchange" shows up in your end-of-year accounts. This is a figure that reflects the difference in the value of your foreign currency holdings over the year - nothing to do with the transactions that have taken place. If the sterling value of the currencies are increasing, this figure will add to your profit and will therefore be taxable. If it goes down, it reduces your tax. There's nothing you can do about that (as far as I know) except to hope that it will balance out in the long term.

I hope this is useful.

Mike