I invoice a customer in their currency, then they pay in my home currency. How do I process the payment, account for exchange gain/loss, and reconcile my bank statement?

if you don't have one, create a 'clearing bank' in CAD currency, type cash on hand
when you receive the payment of 253.00, deposit it to the clearing bank
   using an exchange of 320/233 = 1.3734

your clearing bank should now have 352.07
create a journal entry to
  db chequing account = 320.00
  db service charges 20 * 1.3734 = 27.47
  db exch g/l = 4.60
  cr clearing bank = 352.07

How do you actually process this. As I understand it, you need to set up a vendor in the applicable currency, and invoices will post to this vendor in the applicable currency. If I pay the invoice in another currency, won't I need to set the vendor up for that currency? If so, I will have the vendor listed in currency 1 with an open balance, and a credit in the vendor in currency 2 for the payment. Can I merge the vendor with multiple currencies under 1 name?

Hi martind,

That's a great question and you're absolutely right: in order to have more than one currency associated with a vendor, it would mean setting up the vendor multiple times, therefore creating different vendor profiles. This is true for whether you're using QuickBooks Online or QuickBooks Desktop. There isn't currently a way to set up a vendor or any other account with multiple currencies.

Because of that, recording transactions and payments must be done in the same currency. What has been suggested here for customers is to make the transaction out to the customer in their currency and then when recording the payment in their currency, deposit the funds to an account using the currency you want. QuickBooks will automatically do the calculations of the exchange for you.

When it comes to vendor payments, choosing the payment account is where the currency exchange would come in. Say you have a US vendor. The bill will be created and calculated using USD. When you make a payment, the payment will also be in USD, but you can choose a Canadian currency account to pay it with. Again, the program will take care of the exchange for you. I've got a few articles here about multicurrency that can explain how it works in the program. Check them out and let me know if you have more questions.

QuickBooks Desktop

• Set up and use Multicurrency

QuickBooks Online

• How Mutlicurrency works

I hope that helps clear up the process a bit better. I'll be here if you have more questions.

Hello,

The original poster had the question in my subject line. This the same issue I have. I have read your explanation and the associated articles but neither of them solve the issue as far as I can tell.

I don't use the multi-currency mode of Quickbooks as it appears to me to cause more problems than it solves. However, I have tried on the "testdrive" version to see how it works and to see how enabling it would affect my books.

The problem I see is that you can't create a product or service and sell it in a foreign currency denomination. It appears that you have to denominate your service in your home currency which then gets converted to the sale currency you set up for that customer. This causes a lot of problems in my view and is, in my opinion, the reverse of what should happen.

Let's take an example of a home currency of Canadian dollars and a sale in US dollars. I have a service a sell for $100US. I will like to invoice the customer $100US but I can only set up the service in CDN dollars.

For example, I set up the service at $135 CDN assuming a nominate exchange rate of 1.35 CDN to 1 USD.

When I invoice the client, the system will apply whatever the exchange rate is for the day. Now I have to adjust the invoice to be $100USD because the exchange rates are very unlikely to match up.

When the invoice is paid, my bank converts the US payment into Canadian dollars. I know how to resolved exchange gain/loss differences. That's not the problem and would have to be done no matter what.

In my opinion what should happen is that the service currency should be able to be set to whatever you want - USD in this case. When the invoice is created it should only show $100USD period. In the background the sale would be recorded in CDN dollars at the prevailing exchange rate. When the customer pays, is would be a simple matter of reconciling the CDN amount recorded at the time of the invoice versus when the bank conversion to Canadian was. This could be done with the resolving differences feature in the invoice matching process, for example.

Is there a way to work around this with some entries that might achieve the same thing or have I got it wrong how the multi-currency works?

Hi RM6,

Thanks for reaching out here.  I see there's an abundance of valuable information on this thread when it comes to multicurrency in QuickBooks Online.  It's essential that you're able to enter the transactions with confidence and keep your books aligned.  I feel that you'd benefit from these helpful guides so you're on the right track with your work!

Learn more about Multicurrency in QuickBooks Online

Enter home currency adjustments

About Multicurrency

Please don't hesitate to reach back out with other questions.  We'd be happy to help and other members of the Community can offer other suggestions to assist you with your QuickBooks goals!

Thank you for the quick response. However, this doesn't answer my question. I have read all of the guides and have done quite a bit of research in the community support blog.

Please read my issue and let me know if there is a work around. Multi-currency will not work for me for reasons given. I need to issue an invoice in USD for Services priced in USD and book the revenue in CDN. But since Services can not be created in USD, it doesn't work correctly.

Hello RM6. I can see the benefit of being able to invoice in a foreign currency, however, since QuickBooks only allows you to invoice using the home-currency. I encourage you to send feedback about this by clicking on the Gear icon and looking for Feedback. You're also more than welcome to check out third-party apps which you can find on our app store using this link here. I recommend choosing an app that suits your business needs based on the app description and reviews. Let me know if you have other questions, I'll be here. 

Hello Safari818,

You seem to be a pretty knowledgeable person here so I thought I would ask for your opinion on my solution using QBO.

You can read in this thread what my issue is but here a basic recap.

I don't use  multi-currency because in my view it causes more problems than it solves and it won't solve the problem I have anyway. The issue:

My home currency is Canadian dollars.

I'm selling a Service priced at say $100USD. I want to issue the invoice at $100USD but record the revenue in CDN dollars.

I can only set Services (or any product) up in CDN dollars (QBO is that way by design). So, I have to set the service at say $135CDN which would be a static $1.35 CDN to US exchange rate. 

Now when I create an invoice in USD for the client it converts the $135 CDN to some number close to $100 but not quite because the exchange rates used will never match. However, the USD amount can be adjusted on the invoice to the $100USD number. The misaligns the exchange rate further and I'm not exactly sure what revenue is booked in CDN dollars.

When the client pays the invoice, my bank converts the amount into CDN dollars. Let's say it is $130CDN when deposited (leave aside any bank charges to keep it simple)  Now it becomes a little tricky to resolve and keep accounts straight.

When reconciling the $130 bank payment to the $135 it changes the exchange rate to 1.35. But that exchange rate was just a placeholder given when setting up the Service. In addition, when the association is made there is no opportunity to further reconcile the invoice for any bank charges.

To me this is very awkward and backwards.

Here is the workaround I came up with.

1) The Service amount is set at $100. When the invoice is created it will only show a $100. Since the multi-currency is not on, no currency is displayed on the invoice. (You could a a memo if you want on the invoice to say it is payable in USD).

2) Create the following journal entries (assumes a 1.30 exchange rate for this example but you would use the end of day Bank of Canada rate for the prior day close of business). Set the journal # to the same as the invoice number,  for each entry set the Name to the client's account name (sames on the invoice) 

 DB Accounts Receivable $30

 CR Services $30

3) The invoice will show $100 and that is what the customer will see. You accounts receivable for the customer will show $130.

4) Suppose the payment comes in and it is $120 due to exchange differences and a $5 CDN bank charge. When you match the $120 payment to the $130 invoice there will be a -$10 difference. You can now use the "Resolve Differences"  feature. You assign $5 to the Exchange Gains and Losses account and $5 to your Bank charges account.

This will show the customer has paid the full amount of $130. The bank fees and currency gains and losses will also be properly attributed.

You can use this method for invoicing in any currency without have to to on the multi-currency feature in Quickbooks.

Ok so what did I miss?

Update

I can confirm that this has worked well. Just make sure that the Exchange Gain (Loss) account is created (or enabled).

It is way simpler than the multi-currency set up. With this set up I can accurately track my "home currency" revenue and invoice in what ever currency I want.

When I make the journal entry for the currency gain (or loss) I use the close Bank of Canada rate for the day before the journal entry. This will give the most accurate revenue booking. In addition, when the invoice does get paid in Canadian dollars the resultant gain or loss is justifiable since the source of the original exchange was the Bank of Canada. 

You can substitute any home currency you want and use the same method. Just use your home country's bank for the exchange rate.

What ever you do don't use the multi-currency feature as it will only cause more problems than it is worth. The fix that Quickbooks would need to implement is being able to invoice in a foreign currency and then resolve any difference upon payment of the the invoice (probably the same for bills and expenses).

I hope this helps someone.