I earn commissions in foreign currencies. My suppliers want an invoice to pay against, so they advise me by email of the amount earned in local currency, and I invoice them (their accounts are set up in their local currency). Since I do not know the exchange rate at the time, I ignore the rate and amount that QB pre-fills. The suppliers send the local currency to a foreign exchange service I use. I use an online tool to convert the local currency to US dollars at the spot rate offered, and transfer the dollars to my US bank account. Then I receive the payment in QB, changing the pre-filled exchange rate so the dollars match what I actually received. However, this automatically generates an "Exchange gain or Loss" expense. How do I avoid this?
Update: Just realized that I should be able to edit the original invoice to reflect the actual exchange rate, before receiving the payment. Am I correct in this?
Thanks for getting in touch with the Community about this, LittleGuy.
An exchange gain/loss expense occurs when selling or purchasing goods and/or services in a foreign currency and that currency fluctuates. Since this is inevitable, there isn't a way to avoid it. QuickBooks calculates gain and loss according to your exchange rate field on invoices. For example, when an invoice has a rate of 1:1.5 and a payment is recorded against it at 1:2.0, there will be an exchange gain/loss based on the difference in rates.
In regard to your second question, you're correct. Invoices can be edited anytime. You can additionally adjust the exchange difference from your Receive Payment screen when recording payments. Afterwards, you can check your Exchange Gain/Loss account by going to Accounting, then Chart of Accounts to see where it stands.
I've included a few detailed resources about working with multicurrency that may come in handy moving forward: