Follow the currency through the order
A manufacturer in Germany can quote a US customer in euros and buy components from a European supplier in dollars. Grouping sales by customer location would therefore assign both exposures incorrectly. Build a schedule from the binding order through invoicing to collection. For each currency and month, include receipts, committed purchases and contractual hedges. Keep the translation of a foreign subsidiary’s accounts separate: translating a balance sheet into euros does not itself create a payment by the parent.
Calculate the uncovered balance
Suppose an exporter expects $10 million in receipts and must pay $4 million to suppliers on the same date. A forward sale of $3 million leaves $3 million exposed. At €0.90 per dollar that portion converts to €2.70 million; at €0.85 it converts to €2.55 million. The €150,000 difference applies to the open balance, before fees and tax, not to every dollar of turnover. The illustration assumes the expected volumes arrive and ignores any change in the agreed forward settlement.
Ask what happens when the customer pays late
If the customer delays payment by a month but the suppliers and forward contract settle on time, the exporter may need to borrow dollars or change its hedge. A fully matched annual forecast can therefore conceal a short-term funding need. The opposite problem arises if a customer cancels: a currency sale arranged against an expected receipt may remain binding. Distinguish these timing and volume risks from the exchange-rate effect when explaining the quarter’s result.
Practical check
Show inflows, outflows and hedge maturities by month; a single annual hedge percentage cannot reveal a temporary currency shortfall.