How FX moves erode margin on fixed-price builds

You scope a multi-month build, quote a fixed price in the client's currency, and sign. The margin looks healthy on the day you price it. But milestones pay out over the following months, your developers are paid in a different currency, and by the time the money actually arrives the exchange rate has moved. The price is fixed; the margin is not.

For a fixed-price engagement, currency movement is a one-way risk: you cannot reprice mid-project, so any adverse drift comes straight out of your margin. The longer the contract, the more room the rate has to move. This guide explains why FX risk compounds with contract length on fixed-price work, and how holding the right currency can act as a natural hedge.

Where the margin quietly leaks

The leak sits in the gap between two currencies. You earn in the client's currency at a price fixed on signing day. You spend in your developers' currency at whatever the rate is on each pay day. If the client's currency weakens against your cost currency over the life of the build, every milestone you collect buys fewer of the units you need to pay the team.

Because the price is locked, there is no mechanism to recover the difference. A scoped margin of, say, a comfortable double-digit percentage can be thinned out — or in a bad stretch, largely consumed — by a rate move you never agreed to and cannot pass on. Treat any percentages here as illustrative; the point is the direction of the risk, not a precise figure.

Why the risk compounds with contract length

A two-week piece of work carries almost no currency risk: the rate barely moves and you are paid quickly. A nine-month build is a different matter. The longer the engagement, the more milestone payments are spread across time, and the more chances the rate has to drift away from where you priced it.

• A short contract collects close to the price you quoted.
• A long contract collects in instalments spread over many months, each at a different rate.
• Each later milestone is more exposed than the last, because more time has passed since you fixed the price.

So fixed-price plus long duration plus cross-currency is the combination that does the most damage. Recognising that at the quoting stage matters more than reacting to it later.

The natural hedge: hold the currency you pay in

The cleanest way to reduce this risk is structural rather than speculative. If your costs are in one currency, try to hold revenue in that same currency rather than converting everything back to your home currency at receipt. When the money you collect and the money you pay sit in the same currency, a rate move affects both sides equally and your margin stops swinging with the market.

This is what people mean by a natural hedge: you are not betting on the rate, you are simply removing the mismatch that creates the exposure. For a build where developers are paid in one currency and the client pays in another, holding the developer-pay currency until pay day is often the single most effective step.

Convert on your timeline, not at receipt

Even where a natural hedge is not fully possible, you do not have to convert the instant a milestone lands. Converting at receipt forces every payment through whatever rate applies that day. Holding the funds and converting when the rate suits you — or in planned tranches that match upcoming costs — gives you control over timing instead of leaving it to chance.

The aim is to decouple the moment you get paid from the moment you convert, so a single unfavourable day does not set the margin on a whole milestone. Build a little of this thinking into how you price and stage long fixed-price contracts from the outset.

How Altery fits

Altery is not a bank, and this is general information rather than advice, but it fits this problem directly. You can hold revenue in USD, EUR or GBP rather than converting it the moment a milestone pays, which lets you keep funds in the currency you pay developers in as a natural hedge. When you do need to convert, you can do it on your own timeline — when the rate suits or in tranches that match your costs — instead of being forced to convert at receipt. Real-time multi-currency balances let you watch the margin on a long build instead of discovering it at the end.

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