Earning in one currency, spending in another

Your customers pay you in local currency. Your servers, tools and subscriptions are billed in dollars or euros. Between the two sits an exchange rate you don't control.

This isn't a problem while the amounts are small. It becomes one at the exact moment you start to grow.

The gap nobody measures

Most founders track cash in a single currency. The one their main bank uses.

The tracking is correct, and it is blind. It shows a balance moving. It doesn't say which part came from your business. Nor which part came from the rate.

Your margin degrades and nothing changed in your product. The cause is usually outside your product.

Measuring exposure in three numbers

You don't need a tool. Three numbers, once a month, are enough.

• The share of your costs in foreign currency. Add up the monthly spend billed outside your local currency. Divide by the total.
• The share of your revenue in foreign currency. The same calculation, on the collection side.
• The gap between the two. That is your exposure.

An example. Seventy percent of your costs are in dollars. Ten percent of your revenue is. Your exposure is sixty points. The rate moves five percent. Three percent of your cost base moves with it.

That isn't huge. It is regular, and it shows up on no line of your forecast.

What you can actually steer

You won't steer the exchange rate. You will steer three other things.

• Timing. An annual subscription paid in one go fixes the rate for twelve months. Monthly payment tracks the market. Neither is better, but one is a choice and the other is a default.
• Composition. Some suppliers will bill in local currency on request. Asking costs nothing.
• Price. Your costs are mostly in a strong currency. A price fixed in local currency then moves all the risk onto you.

What it changes

Once you know those three numbers, you can read your own margin.

You separate what comes from your execution from what comes from the rate. These are two different problems. They call for two different decisions. Confusing them leads to two mistakes. Fixing a product that is fine. Or letting a cost drift that is getting worse.

Romy runs this calculation on your numbers, and flags what changes when they move.