Foreign Currency

[Lezzer]

Hi,
More advice please:redface:

As a follow on to a previous thread, my partner is contracted to a US company to do intallations around the world on an agreed daily rate, in US dollars. Once the job is complete, I invoice the company for the days worked plus any expenses incurred. As most of the expenses are in the currency of country where the installation is taking place, I use the exhange rate of the day to record the US dollar amount and invoice the company accordingly. The company then wires the amount owed (in US dollars) to the business dollar bank account. This amount is then converted to Pound Sterling, minus the charges.

Is it correct to wait until the invoice has been paid and then post it into Sage Instant Accounts using the GBP figure advised by the bank?

I do hope this makes some sense to somebody!

Thanks
Lezzer

[Zeno]

Technically, no. You should post your invoice in UK £s on the day you raise it then post the payment against this when you receive it with the difference being taken to the exchange rate gains/losses on the P & L account.

[Lezzer]

Thanks for the reply Zeno.

I guess as the dollar is fluctuating so much hourly, I just use the exchange rate that is current at the time I'm raising the invoice.

Is there a recommended exchange rate service? I use the XE Universal Currency Converter.

Regards,

Lezzer

[Lezzer]

Hi,

Yet more advice needed :redface:!!

I've raised the invoices in dollars and posted to Sage in GBP, no problem.
The invoices are paid in USD to a bank account set up in that currency. Those dollars will usually sit in that account until the exchange rate is favourable then they get transferred into the business current account. Sometimes I have to transfer the dollars even when the rate is not so good, if the current account is getting low!!

At what stage do I record the invoice as being paid? When the dollars are received into the dollar account which could show either an over or underpayment depending on the exchange rate, or, when I transfer the dollars to the business account? Doing it this way, if my understanding is correct, a loss or gain would show in the dollar account at the end of the financial year and this could be posted accordingly.

My apologies if I'm not making myself very clear.

[PhilBen]

Thanks for the reply Zeno.

I guess as the dollar is fluctuating so much hourly, I just use the exchange rate that is current at the time I'm raising the invoice.

Is there a recommended exchange rate service? I use the XE Universal Currency Converter.

Regards,

Lezzer Hi Lezzer there are many services you can use. The banks are quite often the most expensive up to 2 - 4% sometimes. A good currency broker would be your best bet. They would look after you and at the same time get you the best exchange rates. Also you would have various tools to improve on the rates making you the most out of your money.

[Jenni384]

Hi,

Yet more advice needed :redface:!!

I've raised the invoices in dollars and posted to Sage in GBP, no problem.
The invoices are paid in USD to a bank account set up in that currency. Those dollars will usually sit in that account until the exchange rate is favourable then they get transferred into the business current account. Sometimes I have to transfer the dollars even when the rate is not so good, if the current account is getting low!!

At what stage do I record the invoice as being paid? When the dollars are received into the dollar account which could show either an over or underpayment depending on the exchange rate, or, when I transfer the dollars to the business account? Doing it this way, if my understanding is correct, a loss or gain would show in the dollar account at the end of the financial year and this could be posted accordingly.

My apologies if I'm not making myself very clear.

Hi.
I'd post it as received on the date it goes into the $ account, on the exchange rate in force at that date.
Post any difference to the customer's account (+ or - ) to exchange rate variance as Zeno days.

Then when you transfer the money, yes there will likely be an exchange rate variance again.

[Lezzer]

Thank you so much for your help.

It is complicated dealing with the exchange rates but I think I understand what's going on. I'll no doubt be back to the forum for more advice when I get stuck.

Thank you again.

[Spankyx1x]

Pretty much what was stated, yes.