currency exchanging hedging app

How SAAS companies get burned by exchange rates 🔥

By

Seth Phillips | CEO | Bound

We 💜 finance teams from tech companies

We spend a lot of time here at Bound talking with finance teams from venture-backed tech companies.

Like most of the work conversations you probably have, our conversations follow a general outline like this:

“Hey, Where you calling in from in the world?”

[insert your favourite location].

Oh cool, my cousin lived there for a few years. She always said nice things.

…… Wait for it…… here comes the obligatory weather comment…

“Well, you’ve got better weather than us right now. I’d switch [weather-related complaint] for your [generic weather compliment that is, at best, loosely accurate].”

Then the conversation turns to foreign cash flows–which some people might find boring, but we get pretty excited about here at Bound. After all, this is what we do.

Why these finance teams talk about Bound

Finance teams at growth-stage tech companies use Bound’s app to take foreign cash flows that normally bounce around with exchange rates and make them more stable and predictable.

Classic use-cases for using Bound:

  1. A company has relatively predictable foreign revenues streaming into the business and they use their bank or an online currency exchange (Wise, Revolut, Airwallex, etc. etc.) or their Payments Services Provider to exchange currencies at spot rates of the day.

  2. A company has relatively predictable foreign costs streaming out of the business for foreign operations, and they use those same providers to buy those foreign currencies as the need arises each month.

Companies with these use-cases, use Bound’s technology to make these foreign cash flow streams more stable and predictable almost overnight.

How exchange rates can hurt SAAS companies 🔥

One situation that comes up a lot with SAAS companies is the headache of foreign revenue contracts. Here’s an example of how exchange rates can potentially burn saas companies with a lot of international customers.

THE SETUP

Let’s pretend we’re a UK-based SAAS company with European customers. We report our finances in GBP.

This is a fictional example roughly based on 2022 and 2023, but also includes simulated exchange rates into the future.

We invoice monthly in arrears and recognize revenue evenly over the contract.

THE SALE

We sign a new contract with a new customer. Yeah!

European customers don’t like paying in GBP, so we price European customers in EUR.

The new contract is worth EUR 25,000/month for 24 months–EUR 600,000 total. Let’s pretend we sign the contract in Jan of 2023. The GBP/EUR exchange rate is about 1.125 at the time of contract signing. That’s roughly where the rate was for the first half of 2023. We’ll expect GBP 22,223.80 per month in revenue.

Based on that rate, the sales team just booked GBP 533,371.26 . Nice work team!

THE FIRST INVOICE

30 days later, we invoice the customer EUR 25,000 and record our GBP 22,223.80 in revenue.

Of course, over the course of the month the exchange rate didn’t stay perfectly stable. We’ll pretend the GBP/EUR rate moved a little. Let’s say it’s now 1.127. Not a big deal, GBP 22,178.85. Whatever. GBP 44.95 isn’t a big deal. I can just write down our revenue a little, take a small currency loss or maybe I’ll just shrug this off.

THE PAINFUL GBP RALLY

But now let’s run a GBP-strengthening scenario for the remaining 23-months. At the time of writing, in early December 2024, GBP/EUR is up to 1.17. (This is mostly the true story of GBP/EUR over 2023)

I’ve also thrown historic GBP/EUR data into a statistical rate simulator and told it to run a realistic GBP-strengthening scenario.

Let’s see how our company does here for the rest of the year.

currency exchange hedging service app

So, that GBP 44.95 problem in the first month, that we brushed past, ended up being a GBP 63,525.13 problem over the course of the contract. That figure is harder to ignore, especially when you figure we have 50 customers with similar contracts.

If the same scenario with all 50 of our European customers, we’re looking at currency losses or revenue write downs in the ballpark of GBP 3,000,000. And remember, currency losses aren’t just paper losses. This has a real impact to our GBP cash flow.

THE MESSY RENEWAL

One last problem. The renewal. The rate at renewal time was all the way up to 1.19.

The customer is happy and wants to renew at EUR 25,000/month for another 24 months. Seems great, but that’s only going to be GBP 504,201.68 at this new exchange rate.

So, I need to fight for a 6% price increase just to stay steady with the figures from our last contract or I realize revenue contraction from a happy customer. ;(

Again, multiply that by 50 European customers and I’ve got a material renewal problem to deal with.

We love this sh*t, so you don’t have to 😉

These are the types of problems that Bound helps SAAS-companies deal with. Reach out to see if you can make your foreign cash flows more stable and predictable.


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  • Hedge and optimise conversions in minutes

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F¥£K FX
  • Hedge and optimise conversions in minutes

  • Amend transactions in seconds

  • Know that you're getting fair prices

F¥£K FX
  • Hedge and optimise conversions in minutes

  • Amend transactions in seconds

  • Know that you're getting fair prices

Currency hedging for tech companies

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Copyright @ 2024 Bound


All testimonials, reviews, opinions or case studies presented on our website may not be indicative of all customers. Results may vary and customers agree to proceed at their own risk.


Bound (Bound Rates Limited) is a limited company registered in England & Wales under number 13036275 with registered offices at 16 Great Chapel Street, London W1F 8FL


Bound Rates Limited (FRN 966723) is authorised and regulated by the Financial Conduct Authority to act as an Investment Firm.​


For clients based in the European Economic Area, payment services are provided by CurrencyCloud B.V.. Registered in the Netherlands No. 72186178. Registered Office: Nieuwezijds Voorburgwal 296 - 298, Mindspace Nieuwezijds Office 001 Amsterdam. CurrencyCloud B.V. is authorised by the DNB under the Wet op het financieel toezicht to carry out the business of an electronic-money institution (Relation Number: R142701).


For clients based in the United States, payment services for are provided by The Currency Cloud Inc. which operates in partnership with Community Federal Savings Bank (CFSB) to facilitate payments in all 50 states in the US. CFSB is registered with the Federal Deposit Insurance Corporation (FDIC Certificate# 57129). The Currency Cloud Inc is registered with FinCEN and authorised in 39 states to transmit money (MSB Registration Number: 31000206794359). Registered Office: 104 5th Avenue, 20th Floor, New York , NY 10011.


For clients based in the United Kingdom and rest of the world, payment services (Non MIFID related products) are provided by The Currency Cloud Limited. Registered in England and Wales No. 06323311. Registered Office: Stewardship Building 1st Floor, 12 Steward Street London E1 6FQ. The Currency Cloud Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 for the issuing of electronic money (FRN: 900199).

Currency hedging for tech companies

Don't miss the latest

Copyright @ 2024 Bound


All testimonials, reviews, opinions or case studies presented on our website may not be indicative of all customers. Results may vary and customers agree to proceed at their own risk.


Bound (Bound Rates Limited) is a limited company registered in England & Wales under number 13036275 with registered offices at 16 Great Chapel Street, London W1F 8FL


Bound Rates Limited (FRN 966723) is authorised and regulated by the Financial Conduct Authority to act as an Investment Firm.​


For clients based in the European Economic Area, payment services are provided by CurrencyCloud B.V.. Registered in the Netherlands No. 72186178. Registered Office: Nieuwezijds Voorburgwal 296 - 298, Mindspace Nieuwezijds Office 001 Amsterdam. CurrencyCloud B.V. is authorised by the DNB under the Wet op het financieel toezicht to carry out the business of an electronic-money institution (Relation Number: R142701).


For clients based in the United States, payment services for are provided by The Currency Cloud Inc. which operates in partnership with Community Federal Savings Bank (CFSB) to facilitate payments in all 50 states in the US. CFSB is registered with the Federal Deposit Insurance Corporation (FDIC Certificate# 57129). The Currency Cloud Inc is registered with FinCEN and authorised in 39 states to transmit money (MSB Registration Number: 31000206794359). Registered Office: 104 5th Avenue, 20th Floor, New York , NY 10011.


For clients based in the United Kingdom and rest of the world, payment services (Non MIFID related products) are provided by The Currency Cloud Limited. Registered in England and Wales No. 06323311. Registered Office: Stewardship Building 1st Floor, 12 Steward Street London E1 6FQ. The Currency Cloud Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 for the issuing of electronic money (FRN: 900199).

Currency hedging for tech companies

Don't miss the latest

Copyright @ 2024 Bound


All testimonials, reviews, opinions or case studies presented on our website may not be indicative of all customers. Results may vary and customers agree to proceed at their own risk.


Bound (Bound Rates Limited) is a limited company registered in England & Wales under number 13036275 with registered offices at 16 Great Chapel Street, London W1F 8FL


Bound Rates Limited (FRN 966723) is authorised and regulated by the Financial Conduct Authority to act as an Investment Firm.​


For clients based in the European Economic Area, payment services are provided by CurrencyCloud B.V.. Registered in the Netherlands No. 72186178. Registered Office: Nieuwezijds Voorburgwal 296 - 298, Mindspace Nieuwezijds Office 001 Amsterdam. CurrencyCloud B.V. is authorised by the DNB under the Wet op het financieel toezicht to carry out the business of an electronic-money institution (Relation Number: R142701).


For clients based in the United States, payment services for are provided by The Currency Cloud Inc. which operates in partnership with Community Federal Savings Bank (CFSB) to facilitate payments in all 50 states in the US. CFSB is registered with the Federal Deposit Insurance Corporation (FDIC Certificate# 57129). The Currency Cloud Inc is registered with FinCEN and authorised in 39 states to transmit money (MSB Registration Number: 31000206794359). Registered Office: 104 5th Avenue, 20th Floor, New York , NY 10011.


For clients based in the United Kingdom and rest of the world, payment services (Non MIFID related products) are provided by The Currency Cloud Limited. Registered in England and Wales No. 06323311. Registered Office: Stewardship Building 1st Floor, 12 Steward Street London E1 6FQ. The Currency Cloud Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 for the issuing of electronic money (FRN: 900199).