I’m a bit concerned by the way Quickfile converts any PayPal USD amounts to GBP. This could lead me to paying more corporation tax than I should.
At the end of this month, I will have a large amount in USD in my PayPal account which won’t be converted to GBP. I assume Quickfile will be converting this USD amount to GBP using the xe.com exchange rate. But, as we all know, PayPal has a terrible exchange rate.
So let’s say I had $US 15,000 in my PayPal account. Quickfile will say this amounts to £11633 (based on current xe.com rate). But, if I were to convert this now in PayPal, I’d only get £11,306. This is a difference of £327. So, Quickfile is suggesting I am earning £327 more than I actually am.
Also, with each transaction in PayPal USD that I make, Quickfile will be recording this as a GBP figure using the xe.com rate, instead of the real PayPal rate. This is quite worrying, as I have hundreds of PayPal USD transactions a year.
The use of XE.com for calculating foreign currency PayPal transactions is really a compromise. We’ve posted about this in the past and it’s something we discussed when we recently added support for multi-currency in PayPal.
The problem with PayPal is that they calculate exchange rates 2-3 days after the event, so this information is not available to us when lodging the payment to a given invoice. So rather than simple avoiding foreign currency payments altogether (which we had done previously), we infer the rate from XE.com. Obviously using this approach will result in an accrued difference that will need to be periodically journalled to “currency charges”.
It’s not a perfect solution but it was one of the few ways in which we could support multi-currency in PayPal.
Do I just calculate the difference between the xe.com rate and the PayPal rate for the final PayPal USD balance for the year. Would this work to account for the difference in every PayPal USD transaction for the year?
Providing all your transactions have imported for the period, then any difference will likely be due to the varying exchange rates. You can periodically (monthly or at the year end) balance the PayPal account by posting the difference to your “Currency Charges” account.
This would reduce the balance on your PayPal account and post an expense to the currency charges account (7902).
We aren’t able to provide definitive accounting advice here as there may be many variables involved, for that reason I would always recommend you review this with your accountant just to be on the safe side.
There are so many problems with this, its hard to know where to begin. My accountant said contact Quickfile, as he doesn’t know your system.
By doing that example above, that would create a difference between the real bank and PayPal balance and the Quickfile PayPal balance. This would be very confusing to do long term, as the difference between the two accounts will build up?
Also, say for example, I received a payment of $750 on the 1st September 2016, there is no way to find out the exact exchange rate PayPal charged on that date. But we know for certain that it was a horrific exchange rate compared to xe.com.
We understand your pain, and it’s not a problem specific to QuickFile, the account re-balancing would need to be done on any accounting software due to the absence of any exchange rate supplied in the PayPal feed.
It’s actually intended to realign the QF balance with the PayPal balance. With the transactions importing from PayPal on an XE.com rate, your balance on QF will gradually become overstated. The journal reduces the balance in the QF account to match what PayPal are reporting (don’t forget credits and debits are reversed for bank accounts, hence the journal example provided may seem like it’s the wrong way around).
Another option that may work is to disable the PayPal feed and instead report your PayPal sales in bulk (e.g. weekly or monthly). That way you can allocate all the income to a single “generic sales” invoice already converted to GBP. This is far simpler from an accounting perspective but wouldn’t work where you’re using QuickFile to issue individual invoices to clients.
