How to keep single currency accounting but get paid in other currencies from time to time

[Bart_LBS]

I just incorporated an LTD company last month.

To make things simple, I'd like to keep my company's accounting single currency with only one bank account in GBP.

However, from time to time I do get paid in other currencies (USD or EUR). Can I ask my customer to pay me into my personal account and then transfer it to the company account?:
Eg. my customer "owes" me 5000USD. I ask him to transfer the money to my private USD account, then I convert it to GBP, and the converted pounds transfer to my company account.

Then I invoice my customer post-factum the exact amount of pounds I received after conversion into my company GBP account (3910GBP in today's rate).

 

[Scalloway]

Why does the money need to go through a personal account to be converted? If there are substantial sums going through your personal account there may be tax consequences fro the company>

 

[Bart_LBS]

@Scalloway The bank account I'm using is a multi-currency account. That is, If someone transfers USD to it It will appear on a USD account ( I have one IBAN number that can be used for several currencies).

Another option is, I receive 5000USD from a client to the USD account and immediatelly move it to the GBP account (manually), then invoice my customer the GBP amount. Would I then be required to submit the USD accounts at the year-end?

 

[Scalloway]

Another option is, I receive 5000USD from a client to the USD account and immediatelly move it to the GBP account (manually), then invoice my customer the GBP amount. Would I then be required to submit the USD accounts at the year-end?

If the USD account is not holding any money for the company then it does not form any part of the company accounts.

 

[Pish_Pash]

To make things simple, I'd like to keep my company's accounting single currency with only one bank account in GBP.

If you're using accounts software, then multi-currency transactions are simple (so the simplicity you seek needn't be a worry)

If you must go the way you are proposing (& on the face of it, your way may sounds simple, but things can get messy quite quickly), use a currency broker ...they will give you a better rate (vs a bank) & it keeps your 'business' transactions' isolated from your personal bank account.

 

[Bart_LBS]

@Scalloway thanks for this information, it's exactly what I needed. Then I'll just have them transfer it to the company account then exchange manually to GBP. That way, the USD/EUR/CHF account balance will always be 0 and hence I will not need to include it in my accounts, am I thinking correct?

@Pish_Pash Yes, I believe it is much easier with today's software, however, this might even be several different currencies (each currency only 1-2 invoices per year) so that would make it really complicated to have so many accounts.
Anyway, thanks for the info!!

 

[UK Contractor Accountant]

if they are paying you in USD then you must be invoicing in that currency?

You need to record the initial sale and the paymental received at the appropriate spot exchange rate on each date and recognise the exchange gain/loss in the P&L account

 

[Pish_Pash]

Yes, I believe it is much easier with today's software, however, this might even be several different currencies (each currency only 1-2 invoices per year) so that would make it really complicated to have so many accounts.

To clarify...you don't submit annual accounts in all the different currencies...assuming you are setup in the UK, you submit accounts in GBP ...even if you receive in USD, EUR etc.

So in actual fact even if it's only a couple of invoices per year (or a few hundred), the accounts software does the heavy lifting.

In other words, from the little you've shared it seems you are worrying about 'complication' of receiving other currencies that doesn't really exist.

 

[Flatspin]

You can get the official links here: https://www.gov.uk/government/publications/hmrc-exchange-rates-for-2018-monthly

You use those rates in your books, and any difference (between the rate you received & the official rate) goes into the Exchange Rate Variance account.

 

[crdf]

The invoice does not need to be in the currency the payment was send. It can be in GBP, unless it is required by your customer. Also the bank should be able to convert USD upon receipt if the money is send into a GBP accoun, though it is best to request the customer to send set amount GBP into the account from his USD account/ This way the FX conversion is done on his side and you have control of the amount you receive. I would suggest that if you are going to use the HMRC FX to reduce the FX variance but the customer may not be happy about that as they will be covering that variance.
Using EEA currencies will also reduce your bank fees.

If you will be trading with multiple currencies it would be good if eventually you set that up on your system. I realize it probably seems more challening right now but as long as you are able to set local currency and add FX rates the system should do it all for you. You will only need to update the FX. Less hassle for you and the customer to deal with it. You can do the the FX conversion after you record the FX payment as an interaccount transactions