Closing Invoices with Amount Due and Tracking Loss on Foreign Exchange

francine

Hi,

We have a couple of invoices that are marked "Overdue." The situation is we have clients from different countries. We invoice them the amount, but the transfer has fees that we shoulder (i.e. PayPal fees) so we don't receive the full amount on the invoice. We manually record the exact amount that we receive, so it doesn't match with the invoice amount. We'd like to put a note on this as well to track the loss on foreign exchange, if possible. And we'd like to close the Overdue invoices. Please help.

Alexia

Hi, @francine.

It's a bit of work, but you can account for merchant fees in Wave. I answered a similar question in a different thread on the community. You can find my answer in my last reply here. It even includes a bit about handling currency exchange.

We're working on a way to make that workflow smoother, but for now, that process is the best way to handle those transactions. Let me know if you have any questions!

francine

Hi @Alexia, We've looked into the instructions on the link that you shared, and we tried it out but were not able to make it fully work. We got stuck at #3. Can we get live support through Skype or phone somewhere between 07:00 and 18:00 Vienna time? We'd really like to fix this issue as soon as possible.

Alexia

Hi, @francine.

Wave doesn't offer live support for issues like this one. We only offer live support for businesses in Canada and in the United States that are onboarded to our paid services and have questions regarding those paid services. Since most of Wave is free, we simply don't have the resources to provide that kind of support.

You're more than welcome to ask me here and I'll be more than happy to help.

francine

Hi Alexia, these are the instructions you gave on this matter, correct? We can't seem to figure out how to do the transactions you mentioned. Is this also going to reflect on the Invoice once done? Please do clarify the steps we need to take.

@Alexia said:
Alright, @GenuineMarketing, let's see what I can do to help!

I'll start by saying that the very easiest thing to do would be to handle those payments through Wave directly. The restriction here is that you would have to invoice your clients in Euros for it to work. The currency exchange wouldn't be accounted for, because it would be handled on your client's side. The amount of money deposited in your account would be in Euro, and merchant fees would be accounted for automatically. They would still be able to pay with a USD credit card. You can find more info on this here.

With that said, here's how you'd do it manually. For the purpose of this example, I'm assuming that you don't have a USD bank account. Let me know if you do, it makes the process much simpler.

First, there's some setup to do. This, you will only have to do once.

1. Go to the Chart of Accounts page. Click "Add an account" in the top right corner. Add a bank account and call it "Undeposited Funds". Make sure to choose USD as its currency. You'll only have to do this step once.
2. On that same page, create an expense account called "Merchant Fees".
3. And again, create another expense account called "Adjustment for currency exchange" or something along those lines.

Now onto the actual accounting.

1. When your client pays you, record the invoice as paid in full. To do this, find your invoice on the Invoices page, click the arrow next to hit and choose "record a payment". Choose "Undeposited Funds" as the payment account.
2. On the Transactions page, click "Add an expense". Choose "Undeposited Funds" as the account and "Merchant fees" as the category. The amount should match the merchant fee taken by PayPal, or any other service you go through to process your payments.
3. Once the money is deposited into your bank account, create an expense transaction that uses "Undeposited Funds" as the Account, and choose "Transfer to bank, credit card or loan". Choose the bank account that actually received the money from this invoice. Wave will create a transaction for the other side of the transfer automatically, it'll also adjust the currency based on the mid-market exchange rate from xe.com. This will probably not match the amount that was deposited in your account.
4. Create an expense transaction using your bank account as the Account, and categorize it to "Adjustment for Currency Exchange". For the amount, enter the difference between the amount on your bank statement, and the amount in Wave.

And you're done! I do recommend that you check out Payments by Wave. If your clients are comfortable being invoiced in Euros, it would save you a lot of time and energy.

Alexia

Hi, @Francine.

Can you tell me exactly where you're stumbling throughout the process? It is a bit of a complicated one to handle and Wave's support of multi-currency businesses isn't perfect (but we are working to improve that). Let me know what you'd like to break down further and I'll be happy to help.

francine

Hi @Alexia, we're having difficulties moving forward from this part:

3. Once the money is deposited into your bank account, create an expense transaction that uses "Undeposited Funds" as the Account, and choose "Transfer to bank, credit card or loan". Choose the bank account that actually received the money from this invoice. Wave will create a transaction for the other side of the transfer automatically, it'll also adjust the currency based on the mid-market exchange rate from xe.com. This will probably not match the amount that was deposited in your account.

We get this error message:

Failed
Cannot create transfer with that pair of transactions.

Also, will these steps help us to show the Merchant Fees and Loss on Foreign Exchange on our invoices?

Alexia

Hi, @francine.

Can you show me a screenshot of what's happening? You should only have a single transaction selected, not two of them. Because of this, I'm a little confused by this error message. Your steps here should be...

• Create a new expense transaction in Undeposited Funds, for the amount that was deposited in your bank account.
• Select it and categorize it as a transfer to your bank account.

You can also do it the other way around if your transactions are uploading automatically from your bank. Instead of creating a new transaction, select the transaction uploaded by your bank connection and categorize it as "Transfer from Undeposited Funds"

Merchant fees and Gains/Losses on Foreign Exchange won't appear on your invoices. Without calculating them ahead of time and adding them manually, it isn't possible to add those details automatically.

You'll be able to find your merchant fees, as well as your gains or losses on foreign exchange, on the appropriate Account Transactions reports.