How can I protect myself against the falling US dollar when sending work overseas?

November 3, 2007 5:16 AM

How can I protect myself against the falling US dollar when sending work overseas?

As part of my business I outsource web design and programming projects to overseas vendors in various countries. With the falling US dollar, I've recently had a project increase in cost between the time the project was initiated and the time when it was completed, and I want this to not happen again.

The duration between starting the project and completion is usually several months. I currently pay vendors through PayPal, or through the outsourcing site itself for countries that PayPal doesn't serve.

I want to ensure that from now on, whatever I budget for a project, that's what I actually end up paying. Is there a way I could go about doing this?

posted by lsemel to work & money (5 comments total)

Convert all the contracted money to appropriate foreign currency up front? Or invest in other currencies or commodities as a hedge.
posted by knave at 5:31 AM on November 3, 2007

Make sure you're charged in dollars and that your hourly rate or project rate is set in advance. My company charges in dollars, yet am in Europe, and we don't just randomly through the prices up for existing clients randomly. If your outsourcers are actually billing in their local currency, then it's your problem. If they're billing in dollars, they shouldn't just change their rates without consulting you.
posted by wackybrit at 6:15 AM on November 3, 2007

Given the costs of foreign-currency exchange and hedging, you're probably better off paying your suppliers more to take on the currency risk and accept fixed payments in US dollars. However, you will still end up paying a premium, and there's a chance that the supplier will renege if the spread gets too large.
posted by backupjesus at 6:23 AM on November 3, 2007

Don't pay through paypal or the outsourcing site. Negotiate a price in dollars, and pay by doing a wire transfer to the vendors bank account at the appropriate time.

My company works with a number of European subcontractors, the rates are set in dollars, and we are not effected by currency fluctuations (though they are, of course).
posted by alms at 12:19 PM on November 3, 2007

You should be negotiating prices in USD, and when you can't build a fixed exchange rate into the contract so that your cost is always the same.

When I was in college, I worked for a procurement company. Most items involved long lead times, sometimes 6 months to a year, and parts and pieces from all over the world. To stay on budget despite currency fluctuations, contracts had a fixed exchange rate, set on the day the contract was signed.
posted by necessitas at 3:49 PM on November 3, 2007