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GBP Invoice paid in different currency

Hi, I have encountered the following problem:

an invoice in GBP has been paid in EUR to an account in EUR - what would be the proper way to book such transaction? There is no way to tag the payment to the invoice as there is currency mismatch.

Next step: the amount received in EUR has been converted to GBP (transfer between accounts in the same bank) few days later and the amount received in GBP is actually higher/lower than the invoice value so how to account for foreign exchange profit/loss in such case?

I have searched the forum but have not found anything which would apply directly to this scenario. As this will be regular occurrence in my case I would like to find an elegant way of booking such transactions.

Would appreciate step by step instruction as I am pretty new to Quickfile :slight_smile:

As you’ve discovered you can’t log cross currency payments by tagging from a bank feed. You need to

  • “log payment” from the GBP invoice and select the EUR account, which should let you enter the exact GBP and EUR totals
  • delete the untagged duplicate transaction in the EUR account

For the transfer it’s the same as usual, you tag the transaction on one end as a transfer to/from the other, set the amount there in the other currency, and delete the untagged duplicate on the other side. The gain/loss from the currency exchange should wash out next time you record a currency movement journal on the EUR bank account.

There is no way to log payment in different currency than invoice currency. Accounts in currencies other than invoice currency (i.e. sterling) don’t show up on the list. Or am I doing something wrong? The thing is that GBP invoice was paid in different currency than GBP and the payment was sent to the account in this particular currency. So it is not the case of foreign currency payment sent to GBP account.

Oh, sorry, I’ve not done it this way round and I assumed it would just be the mirror image process. In that case I guess you’d have to use an intermediary GBP bank account (e.g. director’s loan), pay the GBP invoice in full into there and tag the money in to the euro account as a transfer from the same GBP account to balance it out and handle the currency exchange.

So:

  1. I should create intermediary “fake” GBP account;
  2. Log the payment of this invoice to this account;
  3. Then go to EUR account and tag EUR payment received for the invoice as transfer from this fake GBP account.

Correct?

Hi @pibykster

Yes - that sounds correct.

Thanks :slight_smile: Will give it a try.

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That sounds correct, though you don’t necessarily need to create a dedicated account to act as the intermediary if it’s just a one-off thing, you can use an existing account like the director’s loan. Though if this is going to be a regular occurrence then you might want to create a “cross-currency payments” bank account just to keep things together in one place.

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It will be happening now and again so I prefer special purpose account to keep those entries separated from more standard items - I offer an option to pay GBP invoices in local currency, where payment is settled by local bank transfer to an account in that particular currency, to avoid SWIFT hassles/charges BEN/SHA/OUR and all those thing resulting in high fees. The solution you proposed works, so thanks a lot for your help. One thing to remember - at the end of the day there is an FX difference which has to be settled via journal entry generated from account settings.

Yes, the underlying nominal balance in GBP of the EUR bank account will gradually drift away from the actual value of that number of Euros at a given day’s exchange rate, so you need to do a currency revaluation journal from time to time (at least as part of your year end procedure, if not more frequently) to account for that.

There’s a free plugin to deal with the FX differences, I use it and it works great.

What sort of plugin? There is a standard system feature I know of but I am not aware on any plugin so please share more details.

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