Working with clients in other countries opens you up to the world of foreign exchange differences. These differences can arise in many ways. Take two simple examples:

1. A small firm with just one UK office provides services to a European client, which wants to be billed in euros. If the bill for, say, €100,000 is recorded in the books when the sterling/euro exchange rate is €1.30/£1 and settled when the rate is €1.40/£1, an exchange difference has arisen. In this case, it is a loss of £5,495.