Hiring guide
Foreign-currency cash exposure: test the rate and the payment date
By CFO Index · Published
A business can expect more dollars coming in than going out and still need to buy dollars before a supplier payment. Ask your fractional CFO to show currency exposure by payment date, not only as a translated month-end total. The practical brief below is a cash-planning exercise, not an exchange-rate forecast or a recommendation to buy a hedging product.
Start with the cash that must actually move
List opening usable bank balances, customer receipts and payments separately for each currency and legal entity. Give each movement an identifier, amount, expected settlement date, evidence and owner. Distinguish an issued invoice from a sales estimate, and a contractual due date from a customer's confirmed payment date. Do not include an opening receivable again as future sales. Keep restricted cash outside the usable balance and flag transfers between entities that need approval or advice.
Write the exchange-rate direction beside the input
If an input is USD per EUR, divide the dollar amount by that rate to obtain euros. If it is EUR per USD, multiply instead. Include the rate date and source; test one amount by hand before copying a formula across currencies. The ECB publishes its reference rates against the euro and states that they are informational, discouraging their use for transactions. A planning reference is not an executable bank quote. Show conversion spreads, charges and settlement timing separately using the terms actually available to the business.
Separate gross movements from the net exposure
Hypothetical example: one company expects a USD 100,000 receipt and a USD 60,000 payment in the same planning period. Assume both are available for offset in the same account, with no opening dollars, fees, restrictions or timing gap. At an illustrative rate of USD 1.10 per EUR, the net USD 40,000 is worth €36,363.64. The alternative rates below are invented sensitivity inputs, not current quotations, predictions or recommended stress levels.
| USD per EUR | Receipt in EUR | Payment in EUR | Net in EUR |
|---|---|---|---|
| 1.00 | 100,000.00 | 60,000.00 | 40,000.00 |
| 1.10 — base case | 90,909.09 | 54,545.45 | 36,363.64 |
| 1.20 | 83,333.33 | 50,000.00 | 33,333.33 |
A lower euro cost is not necessarily a better overall result
At 1.20 rather than 1.10, the supplier payment costs fewer euros, but the larger customer receipt also converts into fewer euros. Net euro proceeds fall by €3,030.30. For a business with net dollar payments, the direction would be different. Use the signed net exposure as a check, but retain the gross schedule so management can see which customer or supplier drives it. The table is not a full cash forecast: add all euro-denominated payments before assessing affordability.
Now move the receipt beyond the payment date
Change only timing: the USD 60,000 supplier payment is due on 8 October and the USD 100,000 customer receipt arrives on 29 October. With no opening dollar balance, the company must source USD 60,000 before the receipt. At the illustrative base rate, that requires €54,545.45 before fees, even though the period ends with positive net dollar inflow. Do not describe the full USD 100,000 as freely convertible later unless the earlier payment has already been funded elsewhere. Model the account movements explicitly and do not count a currency conversion as both new income and a transfer.
Test rate changes and delays separately, then together
Use four cases: the original schedule, changed rates only, a delayed receipt only, and both changes together. Compare the lowest usable balance by currency and date, the amount that must be converted and the deadline for a decision. A favourable exchange-rate case should not cancel an operational payment warning. If an existing currency contract applies, have the responsible specialist confirm its amount, dates and terms before including it; never add an assumed hedge to make the downside disappear.
Make the deliverable small enough to maintain
Request a dated exposure register, documented rate conventions, one reconciled base case and the three alternative cases. Assign an owner to refresh receipt dates and quotes, and record which balance or deadline requires management review. Have another team member recalculate one conversion and move one receipt into a later week. Historical accounting translation, tax treatment, cross-entity transfers and the suitability of financial products require separate professional assessment. The cash schedule should reveal those questions, not claim to settle them.