How do I protect the value of a future receivable from a Dutch buyer who pays in Euros?
We would recommend hedging with a forward contract. A hedge protects an asset’s or liability’s value in a foreign currency against unexpected rate fluctuations for a specific amount of time. If a company chooses to protect the value of a future receivable, the most common hedging tool is called a forward contract. A forward contract is an obligation to buy or sell a specific amount of currency at a predetermined rate for a specific future. The advantage of this hedging method is that it allows you to more accurately project and protect cash flows.
