How to record shortfall in invoice amount, from a foreign customer

Discussion in 'Accounts & Finance' started by neilsolaris, Sep 17, 2020 at 8:22 AM.

  1. neilsolaris

    neilsolaris UKBF Contributor Free Member

    77 1
    Hi,

    I'm trying to work out how to enter a transaction properly in Quickbooks. The situation is this. The company I do the bookkeeping for is based in the UK, and provides services (in the UK). A customer based in Costa Rica was funding a particular project, so an invoice was emailed to them (quoted in sterling). I notice today that the invoice was paid, but it was not quite the full amount. Presumably it was their intention to pay the full amount, but maybe a change in exchange rates put a stop to that.

    I'll email the director later to ask if he'd like them to cover the shortfall. In any case, say he just accepts the amount as it is, what is the best way to record this on Quickbooks please? My thinking is to record the actual amount received on the "receive payment" section. Then raise a credit note for the shortfall. Is there a better way to go about this?

    Many thanks for your help.
     
    Posted: Sep 17, 2020 at 8:22 AM By: neilsolaris Member since: Apr 30, 2018
    #1
  2. Scalloway

    Scalloway UKBF Legend Free Member

    16,390 3,466
    Was the bill issued in GBP? If the shortfall is £6 it will be the standard bank charge for an international transaction.
     
    Posted: Sep 17, 2020 at 8:37 AM By: Scalloway Member since: Jun 6, 2010
    #2
  3. neilsolaris

    neilsolaris UKBF Contributor Free Member

    77 1
    Yes, it was issued in GBP. The shortfall was almost £60, and the total was around £13,000.
     
    Posted: Sep 17, 2020 at 8:41 AM By: neilsolaris Member since: Apr 30, 2018
    #3
  4. Scalloway

    Scalloway UKBF Legend Free Member

    16,390 3,466
    I would check that it is not a bank fee. When you pay an international payment the payer has the option to pay the actual sum or to pay the fee on top. If the payer doesn't pay the fee it is deducted from the money received by the payee.

    For £60 I would just write it off as a bank charge.
     
    Posted: Sep 17, 2020 at 8:47 AM By: Scalloway Member since: Jun 6, 2010
    #4
  5. neilsolaris

    neilsolaris UKBF Contributor Free Member

    77 1
    Many thanks, that's good to know. Hopefully the bank will post the relevant details to the director, and I can check that's the case.
     
    Posted: Sep 17, 2020 at 9:23 AM By: neilsolaris Member since: Apr 30, 2018
    #5
  6. Cloud Accounting

    Cloud Accounting UKBF Contributor Free Member

    36 5
    Yeah you need to see evidence they paid the full amount & if so any difference likely to be bank charges at your end or theirs or both. When you match the payment in QBO, if there's a shortfall it should give a 'resolve difference' option which then allows you to create a simple transaction (coded to bank charges in this case) for the difference.
     
    Posted: Sep 17, 2020 at 3:51 PM By: Cloud Accounting Member since: Apr 22, 2020
    #6
  7. neilsolaris

    neilsolaris UKBF Contributor Free Member

    77 1
    That's very helpful, many thanks.
     
    Posted: Sep 17, 2020 at 3:54 PM By: neilsolaris Member since: Apr 30, 2018
    #7
  8. neilsolaris

    neilsolaris UKBF Contributor Free Member

    77 1
    Just a quick update. I phoned the bank today. There will be a small bank charge, but that will be applied separately. The lady told me the reason for the discrepancy is because of exchange rate differences. The customer apparently paid in Euros (or from a euro based country). When the paperwork comes through, I'll check they paid the full amount.

    However, is this all normal? So even though the invoice is in GBP, the customer can let the supplier bear the exchange rate risk?

    Shall I create a 'loss on exchange rate' account, and debit the difference to there (once I've received the evidence)?

    Thanks again.
     
    Last edited: Sep 18, 2020 at 3:07 PM
    Posted: Sep 18, 2020 at 2:52 PM By: neilsolaris Member since: Apr 30, 2018
    #8
  9. PugwashEQ

    PugwashEQ UKBF Newcomer Full Member

    17 4
    Hi Neil,

    Normally you would have had the conversation with the sender of the funds. Ie if the invoice is in GBP then they purchase that many GBP and send it via the network (and they have to accept all fees and charges on top).

    My only concern would be where you are remitting money from- Costa Rica is no longer subject to capital controls, and they have good fx liquidity, but they won't have many GBP to send, hence why they sent in Euro. The problem is that your receiving bank will have transferred into GBP upon receipt, will charge you a fee for the privilege, and you carry some liquidity risk.

    What you should do is alert a director, but accept if you trade with Costa Rica then you are going to have to accept the risk- i would be cautious about making TOO much of a fuss as there may be nothing they can do functionally!

    As someone else said- write to a bank see expense account.
     
    Posted: Sep 18, 2020 at 4:10 PM By: PugwashEQ Member since: Sep 8, 2020
    #9
  10. neilsolaris

    neilsolaris UKBF Contributor Free Member

    77 1
    Many thanks for taking the time to reply. That makes a lot of sense. I'll discuss it with the director soon.

    Thanks again.
     
    Posted: Sep 18, 2020 at 4:42 PM By: neilsolaris Member since: Apr 30, 2018
    #10