We invoice in GBP but frequently get customers who pay in some mutated currency conversion in their own currency. The foreign payment hits our GBP account where it is converted to GBP and a fee may or may not have been taken by their bank and may or may not have been taken by our bank. Sometimes it’s over, sometimes it’s under.
Let’s say the payment is slightly over. We tag the transaction against the invoice and there is an unallocated amount left. Is there a quick way of creating the journal entries for putting this in the Currency Charges account? It’s easy enough when the invoice has been created in a non-GBP currency because the ‘paid in full’ option is available.
Client pays in a different currency (which they/their bank calculates)
Funds arrive in our account converted to GBP
Their bank may or may not have taken a fee. Our bank may or may not have taken a fee.
There are 2 possible causes for payment (after fees) not matching invoice: bank fee(s) and currency conversion error. We get told any bank fee on the bank advice note. We enter the payment into the QF bank account as credit <payment+bank fee> and debit . After tagging <payment+bank fee> against the original invoice we raised, there may be a small amount difference due to their currency conversion. What I want to do is put that (unallocated if over) difference (could be under, could be over) against the Currency Charges account (or something suitable). Alternatively, how do you suggest we account for the under or overpayment? (We don’t want to refund an overpayment (this is usually impractical) nor keep an underpayment as a debt against them (writing it off is fine).)
It may be simplest here to use a holding bank account (in GBP). The payment you actually receive would be a transfer from the holding account to your current account, then you can mark the invoice as “paid in full” into the holding account and the advised bank fees (if any) would be money out of the holding account tagged to bank charges either via “something not on the list” or with a purchase invoice if you want to attach a scan of the advice note.
The residue (positive or negative) will be left as a balance on the holding account, which you can then clear out via another “something not on the list” to currency charges (either there and then for each payment or in a lump correction at year end).
Thanks for the suggestion, Ian. I might as well just get a calculator out, delete the automatic single bank entry and input 3 new entries manually. One credit for the invoice amount, one debit for the bank fee and one calculated credit/debit for the xchange residue. It only happens with a few payments. It just seems pointless creating a hidden holding account (I’m likely to forget to use it), though your idea of a single year end lump sum correction would save time.