Multi-Currency Software Contracts: Managing FX Risk
How exchange rates affect software contracts priced in foreign currencies, how to report them consistently, and ways to reduce FX risk at renewal.
By the MI Solutions SAM team8 min read2 exhibits
Many organizations buy software priced in a currency other than the one they report in: US dollar contracts for a European company, euro contracts for a UK subsidiary, and so on. Exchange-rate movements then change the cost of a contract without anything changing in it. Over a multi-year agreement, the effect can be large enough to matter in the budget.
The effect of exchange rates
Exhibit 1
Separate FX from everything else
When a foreign-currency contract costs more than planned, there are three possible reasons: the price changed, the volume changed, or the exchange rate moved. Only the first two are decisions. Reporting them separately keeps the conversation focused.
Exhibit 2
Good practice
How MI One helps
Frequently asked questions
Which exchange rate should the budget use?
The rate your finance team uses for planning, documented and applied consistently.
Can we ask vendors to bill in our currency?
Often, especially for larger contracts. Compare the converted price carefully.
How often should rates be updated in reports?
Monthly for actuals, and at agreed points in the year for the forecast.
See where your software budget goes
Bring your five largest vendors to a 30-minute call. Our SAM experts will show you where the savings usually hide, and how fast MI One can surface them.
