I just discovered that I'm losing money on my foreign customers because of the way that QBO handles currency conversion on expenses.

[JessT]

Hi kdean-dolphin,

It's never fun to loss money while doing business. We're here to help you with this.

Would you be able to add more details about the challenges you had with the exchange rates in QBO? You can be as detailed as you want.

Thank you in advance.

[kdean-dolphin]

Here's the problem.

I'm in Canada, and I have some US customers. Some of my expenses, most notably my air fare, are incurred here and so in Canadian dollars, for which I have to bill my customers in US dollars.

Let's say I incur a charge of $1,300 CAD. Because I have to convert my client's USD to CAD to pay for it, I want to use my bank's USD-to-CAD exchange rate at the time that I generate my invoice. I then attach a printout of the bank's exchange rate to the invoice to justify it. Naturally, there will be a small loss or gain due to fluctuations in the exchange rate after I get paid and then pay the credit card bill, but that pretty much evens out over time so there's no issue there.

The problem is in the exchange rate itself. Banks charge a premium above the nominal exchange rate, so what QBO records as the exchange rate is not the rate I pay for the USD-to-CAD conversion.

Let's assume, for argument's sake, that there is no fluctuation in the exchange rate in the period of time between incurring an expense, billing for it, being paid, and converting the payment from USD to CAD to pay the credit card bill.

I incur a charge of $1,250 CAD and the nominal exchange rate at the time is 1.2500. I mark the expense as billable and select my USD customer, so QBO therefore records an unbilled expense in the amount of $1,000 USD. I invoice my customer, they pay into my US dollar account, and then I go to pay my credit card bill on which the expense appears.

To pay the credit card bill, I need to convert USD to CAD. However, even though the nominal exchange rate is 1.2500, the bank charges a premium and their exchange rate is only 1.2250. That $1,000 USD, which was intended to reimburse the full amount of $1,250, is worth only $1,225. I'm out $25, because I have no way to set the exchange rate on an unbilled expense in CAD when billing a USD client. I have now lost $25. Add up all my travel and other expenses over the course of the year and I'm losing hundreds of dollars on this.

I don't have a problem going the other way. I have a USD credit card, so if I have a USD expense incurred on behalf of a CAD client, then when it's time to invoice the Canadian client, I simply go back to the original expenses and update the exchange rate to the bank's CAD-to-USD exchange rate before generating the invoice for my expenses. Doing so automatically updates the unbilled expense records to the right CAD amount. If I had the same ability to go back to CAD expenses for US customers, the problem would be solved.

[Anonymous]

Thanks for the detailed explanation. With QuickBooks Online, you can edit the currency exchange rate on billable expenses in a few simple steps:

1. Select Expenses from the left menu
2. Select the Expense you wish to edit
3. The current exchange rate is located on the top left corner
4. Edit the rate as needed
5. Select if you wish to use this rate for this transaction only, or for all new transactions in United States Dollar (USD)
6. Select OK
7. Select Save and close

Let me know if you have any other questions.

[kdean-dolphin]

That's fine if it's a USD transaction that I'm billing back to a CAD customer, but when it's a CAD (local) transaction billed back to a USD (foreign) customer, that field doesn't appear, so I'm stuck with the rate in QBO. That's the whole point of this thread.

[Anonymous]

I see what you mean. The system is working as intended in regards to currency exchange rate calculations. If your bank charges you extra fees for conversion, I suggest adding those amounts as a line item when creating invoices for your USD customers that include CAD billable expenses.

You can leave feedback to the development team straight from your dashboard by selecting the gear icon > Feedback. QuickBooks Online is a flexible software with new features and options being added on a regular basis. 

Reach out if you need help with anything else.

[kdean-dolphin]

I'm aware that it's working as intended. My point, though, is that the way it's working is, up to now, losing me money. I consider myself to be a savvy user; I've been using QuickBooks since 1994 (online since 2016), I understand pretty much every feature, and while I'm not an accountant, I do have an MBA and thoroughly understand the accounting process.

If I, as an experienced user, am having this problem, you can bet that lots of others are having it as well and they're losing a lot of money without knowing it.

I have already adopted your suggestion for my most recent invoice, but I can't go back to my old invoices and ask my customer to pay me the differential. I'm stuck with the loss of hundreds of dollars because I assumed that the exchange rate field on the invoice was the exchange rate that would be applied to the CAD expenses brought into the invoice. I am not happy to discover that it isn't.

As for the workaround of adding a line item, it's a lot of work. I'll give you a two-expense example, but bear in mind that some of my invoices can have four or five expenses in one.

Expense #1: two days ago, $1,000.00 CAD, nominal exchange rate 1.28, USD equivalent $781.25

Expense #2: one day ago, $1,400.00 CAD, nominal exchange rate 1.25, USD equivalent $1,120.00

Today I generate my invoice. At the time that I generate the invoice, my bank's exchange rate is 1.20. With the total expenses of $2,400.00 CAD, I need my customer to pay me $2,000.00 USD. Given that I can't change the unbilled expense records, the invoice will show $781.25 + $1,120.00 = $1,901.25 USD, for a net loss of $98.75 USD or $118.50 CAD (at the 1.20 bank exchange rate).

In order to figure out the adjustment, I have two options.

The first option is to review every CAD expense I'm going to add to the invoice, add them all up, calculate the proper amount based on the bank exchange rate, and add a line item to bring the invoice up to the right amount. To verify my invoice, my customer will have to do the same (after they send me an email asking me to explain what that single line item is).

The second option is to review every CAD expense I'm going to add to the invoice and, for each of them individually, calculate the proper amount based on the bank exchange rate, and add a line item per expense to bring the invoice up to the right amount. This has the advantage that I can be more descriptive per line (e.g. "Exchange rate differential for previous line, $1,400.00 CAD @ 1.20 = $1,120.00 USD") and so minimize my customer's audit process, but it's still a pain for both of us.

I subscribe to QBO to save time and money and focus on my business, not to discover that I have to spend extra time to save myself from losing money. I'm down a few hundred dollars thanks to this design and am definitely upset about it.

Rest assured that I will be sending a link to this discussion through the gear icon.

[Anonymous]

Thanks for the feedback kdean-dolphin. I'm glad to hear that you've been using QuickBooks products for over 20 years and I take your concerns seriously. Based on your detailed examples, I reported the inability to edit the exchange rate on billable expenses. Keep in mind that submitted feedback will not trigger a discussion with the development team. The team receives the feedback as comments for review and consideration in future updates.

[kdean-dolphin]

Thank you. I look forward to an update that addresses this omission.

[Anonymous]

You're welcome!