Paypal Multiple Currencies and Book keeping - How??

[squick2010]

Hello,

I am scratching my head right now, I have to do my V.A.T return and just cannot work out how to input all my Paypal transactions in my software.

I have received payments in GBP, USD and Euros, it looks like Paypal does not convert the currency Automatically. For example, I have a receipts of 12 USD, how do I input that in my software knowing that my currency is different? Also If I convert the currency to my own currency, who knows that it is right amount?


How do you do your Bookkeeping with Paypal please? Surely currency conversion through websites cannot be perfect due to fluctuations.

Thank you,

Ben

 

[talkinpeace]

Paypal most certainly does convert the currencies - transfer the money from each of your currency accounts to your UKP account and then withdraw it. That gives you the true exchange rate.
There are paypal experts here
http://community.ebay.co.uk/forum/Payment-Topics/1900000771

 

[squick2010]

Thank you TalkInpeace,

I will check out the link you gave me,
Very kind of you!

Regards,

Ben

 

[ianonline]

Hello, I have the same problem. I looked at the link but it is all about eBay and payments, not book-keeping. I am in the UK too but most things I buy and sell are in $USD, not UK£. I am looking for a way to record this but have found there does not appear to be one. Can you offer any advice on this?

Should every transaction be immediately converted into UK£ as soon as it arrives? I have just received a $USD payment into PayPal who promptly took their fee in $USD before any UK£ conversion was possible. Should I record the PayPal fee at all? I could pay myself in $USD which Paypal would convert to UK£ when I pay myself, but HMRC won't accept transactions in $USD, will they?!

Is it acceptable to convert just the balance to UK£ once a month, or should there be a whole other spreadsheet for all transactions in every currency?! Then there is the VAT percentage (sales tax in the U.S.) which is different for every U.S state!

Thank you for your help.

 

[andygambles]

Create seperate PayPal accounts in your book keeping software for each currency.

So

PayPal - EUR
PayPal - GBP
PayPal - USD

record sales in to the relevant accounts. When you move currency record this as a transfer in your accounts eg

Debit PayPal - USD
Credit PayPal - GBP

Depending on exchange rate fluctuations you may have to do currency revaluations.

 

[squick2010]

Hi Ian,

Sorry I did not reply to the thread but I have found a solution a few months ago, it cost a little bit of money but I think it is worth the spending.
There is a software on the net called KashFlow, it will automatically convert all the currencies for you when they will be moved from the Paypal account to your accounting software, all done automatically on a weekly or hourly basis, I love it.

You should also check their direct competitor called clearbooks, half the price and I think they do pretty much the same thing, but I still need to take their trial and give it a go.

I really apologized I did not add the answer to the thread but I totally forgot about it.

I pay about 28 GBP per month for the service, a few sales cover the cost and all the hassle of doing the things manually.

Good luck and hope you will be happy with the reply.

Ben

 

[ianonline]

Hi Andy and Ben,

I use a spreadsheet at the moment and earlier this afternoon, I thought of adding columns to show transactions in other currencies. These columns are on both sides (expenses and income), and are not included in totalling the income and expenses. See the screenshot to see what I mean. I'm not sure it will work, but it does show where the money comes from, including the PayPal reference and in the comment the amount of the PayPal fee, though I don't know if that fee should go under expenses or into sales as they take it before I get the proceeds of the sale. What do you think?

I'm familiar with Kashflow and Clearbooks and many others which also have smartphone apps for updating while out of the office, but for now I'm deliberating as transactions are only occasional and a spreadsheet is enough. An interesting one that launched recently is U.S based and which works with banks worldwide is Wave Accounting and is completely free (ad-supported).

 

[andygambles]

Sale is the full transaction value. PayPal Fees are expenses.

 

[squick2010]

Thanks for the Wave accounting links, just checking it now, I am trying to work out if they have the auto paypal import with currency conversion, I cannot find it at the moment, I have emailed their support....nice ...FREE

 

[madrilian]

The VAT element of a transaction CANNOT be accounted at the rate of exchange rate set by paypal. Paypal exchange rates are not "real" as they include a hidden commision set at 2.5%

You cannot just take a sale of 12USD, and put it in your accounting as whatever value is converted in GBP. Even less, if the conversion happens days or months after the transaction. For VAT purposes, that does not work.


HMRC has two methods of calculating the VAT element of a transaction in foreign currency:

- One is to use the "period rates" they publish in their website. That is, the VAT element of a transaction od 12USD must be calculated at the rate they tell you, and that's what you will have to pay to HMRC no matter what the amount in GBP paypal gave you.

- Second, is to use the london stock exchange rates for that day. They must be "UK selling rates". Maybe you can find these rates in the Finantial Times online website, or similar place.

- You can also use other exchange rates, but needs to be aproved by HMRC.


I use an accounting software called Xero, that handles multi-currency ver well. Quickbooks online can now handle multi-currency in a very good way too, although I still prefer Xero, as they do revaluations and calculate gains and losses automatically.

Xero and QB online will use the current exchange rates when accounting for your transactions and your VAT. The exchange rates they use are not exactly the "uk selling rate" as the HMRC wants, but the differences are so small, that unles you have a big turnover, you VAT return will only be out by a few pence.

Later, when amounts are converted into GBP, the software calculates the differences between the real exchange rate and the rate you got as "currency exchange gains and losses".

 

[brthlmew05]

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