Outsourced translation is growing quickly in today's publishing business with the use of Internet. The major possible advantage at client side is the lower cost and shorter turnaround. However, freelance translators must consider exchange risk when providing the services. Negligence of this will result in losses without too much attention.

When a U.S. company needs to translate a web page into Japanese, it has several options. It can find some Japanese immigrants living and working in America and make payment in US dollars and there will be no exchange rate problem. However, in most cases, resources in Japan will be cheaper since the supply of service is adequate than that in America mainland. At the same time, the translation will be more native as they are closer to the market.

The U.S. client will usually compare offers from several potential Japanese service providers to determine the best price and quality. The U.S. buyer usually prefers to pay for the services in US Dollars, but the Japanese must pay local expenses in Japanese Yen. One of the two parties to the transaction will be forced to deal in a foreign currency. Either the U.S. client will end up paying in Dollars, with the Japanese provider forced to convert the payment to Yen. Or, the U.S. client will convert the Dollars to Yen first and then pay the Japanese provider. Since client has more bargaining power, client will decide the payment currency. US dollar, as home currency, will be used by American clients in most cases.

Another thing is payment term. When a work is finished, client need to check its quality and then deliver to next step such as send to webmaster to integrate into company site. Then client will report to accounting department for payment. The larger the company, the slower the process. Usually 30-day or 45-day time need to be waited. Since the project itself will also take a certain amount of time to complete, depending on its size. Hence, the period between the order date and the actual receipt of payment can range from at least 1 month. At this point, the risk from exchange rate differentials comes into play, since rates are free to move up and down in response to changes in underlying economic conditions and the policies of individual countries.

Let's see several data. The rate between USD/JPY is 113.19 at the end of 2007. It dropped to 99.27 at the end of March, 2008. So if a Japanese translator agreed to do a work in Jan 2008 for a American client and gets paid in USD till March 2008, his/her exchange loss will be 12.3%! It's not a small percentage at all. After March, the rate climbs up step by step to reach around 107 by end of June, with a gain of 7.8%.

Freelancers must be aware of the risks and take some proactive measures to minimize the exchange loss due to exchange rate volatility. The first thing to do is to try to shorten the payment term. When planning tasks, especially if it is large-scale, set two or three payment milestones and get paid phase by phase. And then diversify the currencies. For example, using USD and JPY in payment on a half-half basis will efficiently reduce the risk.