How To Operate Your Canadian Business in U.S. Dollars
How To Operate Your Canadian Business in U.S. Dollars
Within weeks after joining B-School, I started getting inquiries from people in the US wanting to work with me.
Though I had prices listed on my website, I hadn’t specified the currency. The assumption seemed to be that they were in USD.
…I decided to go with it.
Boom! 35% raise overnight.
But I quickly realized that it wasn’t as easy as I thought to deal in US dollars. I can’t believe I’m admitting this, but I actually said to my first US customer “I’ll make up your invoice for the equivalent amount in Canadian dollars.” (Cri-i-inge.)
This is a screen grab of the invoice I sent her.
The total of the credit card bill was almost certainly NOT what I predicted because exchange rates are completely unpredictable. It depends on the day you pay the bill and the rate you get at the bank, which, as far as I knew, were both completely random.
Which is what brings me here, to this blog post.
You’d think serving US customers and charging in USD would be as easy as selecting a currency and sending an invoice, right?
For starters, software solutions that SAY it’s that easy are lying. For the privilege of ease, they’ll scrape off all manner of charges. International fees. Transaction fees. Credit cards fees. And a cut of whatever you get on the currency exchange.
It’s a mess.
Kind of like my books right after I made the switch.
In the interest of saving OTHER Canadian online business owners from making the same mistakes I did (because there’s precious little information about this available online), here are the basics of what I learned since hitting “send” on that fateful invoice.
WHY DEAL IN U.S. DOLLARS?
It’s a universal currency.
When people buy things online, they assume the price is in USD, unless otherwise stated. And with the exchange rate hovering at 1.28 as I write this blog post, that’s a pretty good reason to reconsider your currency.
You won’t be breaking new ground.
I have Australia contractors who bill me in US dollars.
My students in Finland, England and Slovenia all pay me in US dollars.
One day maybe we’ll all live in Utopia and deal in Bitcoin. But for now, the currency of the global economy is US dollars.
Next, there’s VISA Debit.
Canadian banks are starting to offer these, but the country has been slow to adopt these. And when you open a USD chequing account with a US bank, it comes standard.
Visa Debit is the ultimate credit solution for freelancers. It’s really tough to get credit when you don’t have a steady paycheck. My first few years in business did nothing to make me more appealing to the bank. I reported 3 years of net income in the 4-digit range!
And if you can’t get a USD credit card (it took me 5 applications before I got approved), you end up paying for the services & software you need to run your business with a CAD credit card.
Translation: you pay an extra 3% for everything.
With VISA Debit you’re basically paying straight from your bank account, but as though it’s a credit card.
HOW TO DEAL IN US DOLLARS
You need the right accounts and software, or things get messy real fast.
To start, you need a USD bank account, and there are lots of options that don’t require you to physically be in the US.
Some of those options are awesome (like a Transferwise Borderless account, for example) and some are there solely to pinch money from your account and crush you with fees (like Payoneer, for example).
But if you want a system you can scale, one that your future bookkeeper won’t hate you for, you need a proper bank account. Preferably one with a “routing number.”
Here’s the deal:
Canadian-based USD accounts don’t come with a routing number. They come with a transit number, account number, institution number
And the only way to get one is to open a USA-based chequing account. Which is easier to do than you might think. Most Canadian banks have “partner banks” in the US.
In America, TD Canada Trust is just called TD. (“America’s Most Convenient Bank”)
Same for RBC and Scotiabank.
BMO has BMO Harris.
Unless you deal with a credit union, you can walk into your bank today and open a US-based chequing account (or “checking account”, I suppose) with their partner bank, without stepping one foot on U.S. soil.
Boom! You’ve got your routing number and you’re ready to start accepting US dollars.
You also need a way to invoice in US dollars.
And not all software solutions are good at handling this. Quickbooks (QBO) is notoriously multi-currency un-friendly (a big part of why I’m moving to Xero). Once you’ve set the currency of your business in QBO, you’re stuck with it.
QBO can track your USD transactions and will even let you bill in USD, but you can’t accept payment via QBO in any currency other than the currency of your business, which for me, at the end of the day, is still Canadian dollars.
The quick fix for me was to use Wave for invoicing. But in order to do that, I had to set up a second business in Wave, with USD as the currency. (At the time I was invoicing from a Canadian Wave account.) Once I connected that to Stripe, I could start offering USD credit card payments directly from my Wave invoice.
But here’s the rub: Wave only lets you look at one business at a time. There’s no summary. So if you want to know what you invoiced this month, you have to check both accounts and add up your monthly totals.
Can you see my bookkeeper getting red in the face?
But whichever solution you choose, you can probably sync it with Stripe. That’s the easy part. Stripe will connect to your USD bank account and voilà! You’re up and running.
Note: Stripe will transfer money into a US-based USD account (using your routing number) OR a Canada-based USD account (using your transit and institution numbers). PayPal will ONLY transfer to the former.
HOW TO EXCHANGE YOUR US DOLLARS
This is the most-neglected part of the whole process, and it can get complicated really fast.
(Definitely, join my “Get Paid In USD” training if you want to master this part.)
The easiest way is to let the bank do it for you. Just move dollars from your USD account into your CAD account using your online banking app. It’s immediate, but the bank will skim off at least 0.03 on every dollar for this privilege.
Worse, they don’t publically publish their rates on their website. So you don’t know how much you’re getting until 1 second before you actually hit the “transfer” button.
But may I suggest an experiment?
Check today’s rate on XE.com then use your bank to transfer a couple bucks. You’ll notice that your bank’s rate is off by a few cents…in the bank’s favour.
Now I don’t mean to hate on the banks. I bank with TD and they rock. But their multi-currency solutions are limited when you’re a small business. You can negotiate a “preferred rate” when you’re exchanging $20K+ per month, but until you get there you’re stuck paying them their 0.03 on every dollar you earn.
The USD solutions that Canadian banks offer are essentially for snowbirds, not for businesses. You’re extremely limited in how you can move money around and what rate you can get for it.
If you want to pay your USD credit card you need to have an account with that same bank. Otherwise, the only option is to physically carry a cheque into the branch. As a Gen X-er running a fully online business, this seems completely archaic.
And depending what bank you choose, you may run into trouble transferring money between your Canadian bank and their US Partner bank. Yes, even though they have the same name!
In order to pay my RBC USD credit card, I have to transfer money from my checking account at RBC-US, to my savings account at RBC-Canada, and then onto my credit card.
But if I wanted to pay my RBC USD credit card from my TD USD account, I have to bring a cheque into the branch.
…and those are considered simple solutions.
At TD, you can’t transfer money from your TD-US account unto your TD-Canada account without getting a rep on the phone. Which takes for-ever. I’m getting a headache just thinking about it.
Either way, moving money around isn’t super easy.
And currency exchange with the bank is usually a bad idea.
THE BEST CURRENCY EXCHANGE SOLUTIONS
Transferwise is a great solution if you’re using their borderless account. (Just don’t come crying to me when your bookkeeper pitches a fit. You can’t download statements from their borderless account, only a .csv file.)
Curexe is especially awesome because it’s the only currency exchange software I know of, that will pull money out of a Canadian-based USD account (i.e. without a routing number) and deposit it right back into your CAD chequing account. The fee is less than 1%.
Every other software I know of will only do this if you have a US-based account with a routing number.
If you don’t want to go through the rigmarole of opening a US-based USD account, you can get around it by just opening one at your local bank and using Curexe to exchange your currency.
I use XE.com to track rates, and I get live updates on my home screen with their iPhone widget, so I can take advantage of favourable exchange rates.
WHERE TO GO FOR MORE INFORMATION
This is extremely introductory! I’ve only scratched the surface and given you solutions for an absolute beginner.
But if you’re serious about setting up systems, and doing better than I did when I was transitioning my business into USD-only, then you should join me for my GET PAID IN USD training.
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