The rule of due caution is commonly known in road traffic situations. However, it is also very useful in other areas of life and that includes business, too.
The everyday life of a vast majority of European translation agencies is a never-ending struggle with the ever-changing currency rates. As a rule, only the giants of our industry can dictate the currency for all contracts. Smaller players must adapt to the requirements of their customers. It means working with several currencies. In our case the customers paid us in EUR, USD, GBP, CHF, SEK and JPY (earlier also in DEM, FRF, BEF, ITL, ESP, and ATS). We, in turn, paid our providers in EUR, USD, and PLN. According to the accountancy rules, our books were kept in PLN, although more than 95% of our income was invoiced in foreign currencies.
It was obvious to me that fluctuations in currency rates may cause significant problems in our financial situation. Therefore we chose EUR as our basic currency for our Translation Management System (TMS). There is a very useful tool built into our system which converts all used currencies into EUR. Additionally, our TMS was connected to the website of a reputable bank that published currency rates on a daily basis (except for banking holidays). In this way, the exchange rates used in our system were always up-to-date.
One of the users of the same TMS took it even further. They combined the financial results of the company, expressed in EUR, with the bonus system for their staff paid in their local currency.
However, one day the bank website changed and the currency rates were no longer updated on a regular basis. The system kept the last downloaded table of exchange rates. And just at that time, the local currency dropped significantly against the EUR and USD. The reality of ex-Soviet countries is that a rapid devaluation by 20-25% is quite “normal”. As a result, the calculated bonus did not reflect the real value of money which caused dissatisfaction among the staff, who felt cheated.
This is a typical illustration of the fact that you should use your IT tools with a certain degree of caution. The best method is to check the automatic calculations by performing some rough estimations. A measure of common sense together with a few rough calculations are the best way to avoid serious mistakes.
The rule of due caution is also valid in managing a translation agency – even with a good TMS in place.
Jurek Nedoma is also co-founder of the professional TMS software development firm XTRF Management System.