I followed your previous answer for mapping a USD invoice paid into an FX service from which a USD amount paid a USD sub contractor and also had a conversion of the remainder USD amount into a GBP amount. It always leaves me with a overdue amount. It also uses an exchange rate that is wrong, where do I change this? It has to change for each and every FX deal of course. Even if it is right the invoice will never be covered off because the subcontractor is paid out of the overall invoice amount issued.
So to recap
Issue invoice for $18755.00
Payment comes in minus their bank fees to the FX service, $18735.00
I pay $1750 to the subcontractor
I do a FX deal of the remaining $16985.00 converts to £10722.64 at 0.6313 exchange rate
This GBP amount is transferred to my business GBP current account
If I set up the invoice in USD and pay in the reduced GBP and tag it, it uses the internal FX rate and will always be short? How do I get around this. If I can change the FX rate I could fudge it, but it doe snot seem right to do this. I am tempted to just adjust the invoice to GBP that I received from the FX deal, it all would balance then
If you’re paying the USD invoice into a GBP account then when you log the payment you will have the ability to enter both the amount in USD being paid down and the amount in GBP allocated to the account, the exchange rate will just be assumed from those two figures. So if you wanted to pay the full invoice of USD 18,735.00 by depositing GBP 10,722.64 to your Sterling account, you can do that without any balance left on the invoice.
Note I am only paying part of the USD invoice amount into the GBP account, there will always be a shortfall equal to the suppliers bank charges (step 2) plus the USD amount paid to the sub contractor in step 3. So you are saying we are basically using a fudged USDGBP exchange rate to make it balance?
At point 2 your invoice is considered fully paid up as far as the client is concerned. At this point I would suggest paying the invoice in USD and in full to the FX account (which should be represented as a bank account in QF denominated in USD).
You would then add a debit on the FX account equating to the bank charge (for the FX service) and tag that to a supplier in the name of the FX account services (tag to bank charges). At that point you have $18,735.00 sitting on the FX account.
If the sub-contractor is invoicing you in USD you can pay that USD invoice directly from the balance in the FX account.
Now for the NET amount received in GBP you would enter another debit on the FX account for $16,985.02, tag that as a bank transfer to your GBP account and enter £10,722.64 as the amount received in GBP.
In the end you’ll have the FX account close to zero (any difference you could post to currency/loss gains), the original invoice paid in full, the sub-contractor has been paid and the exact amount in GBP has landed in your GBP current account.
Of course I need to append the standard disclaimer here, so would recommend you seek professional advice if you have any doubts on accounting related matters. This information is only for general guidance purposes.
Thank you for such a detailed treatment. It is explanations like this that allow me to understand a lot more how to post these complex transactions in quickfile.
