Accounting for foreign currency transactions
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Accounting for foreign currency transactions
If your business issues invoices or makes purchases in a foreign currency, Wave will automatically keep track of how these values convert to your 'home' currency to keep your bookkeeping accurate.
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How does FX work on payments or checkout? Is there a FX commision? Or is it just interchange FX rate like visa rate as is?
Hi @WoodpeckerBaby! I see that this is your first post, so welcome to Wave's Community Forum!
If you are referring to the fees on foreign exchange specifically when you use Payments by Wave or Checkouts, then I'll be happy to further explain.
Payments by Wave and Checkouts are only available for US and Canadian businesses with their currency set to the matching currency (i.e. CAD and Canadian Business, or USD and US Business). When you invoice your customer and have Payments by Wave active, the invoice will be created in your home currency (CAD or USD). While the customer can pay using their home currency, they will be paying the equivalent amount to the invoice total in their currency and it will be deposited to your account in your home currency. This means that you will typically never truly see a gain or a loss when you use Payments by Wave and you will never be charged an exchange rate. If your customer chooses to use a foreign currency to pay for your invoice, they may be charged the exchange rate by their financial institution, as their institution will be responsible for making the exchange before it is delivered to you. As the amounts deposited into your account will be in your home currency, there will be no need for you to complete any additional bookkeeping steps to account for this, as you will never see the foreign currency hit your account.
Businesses outside of Canada and the US, or businesses who have set their home currency to one that is not CAD or USD, will be prompted to use Wave + Stripe integration. The accounting may be slightly different, so if you find yourself in this situation, let us know and we can explore that together.
Hi what is the source of the published daily mid-market exchange rates??
Hey there, @Cheryl_C
We use https://www.xe.com/ as our source for the daily mid-market exchange rates!
The last Q/A is the most important for me, but the link goes to a blank page... Can you help?
Hey @Tomi. If you are referring to the last FAQ in the help centre article, here's a screenshot of what this looks like in Wave:
Hey @JamieD, what I want to see is the one mentioned as "Gains and losses in Foreign Currency Bank accounts need to be tracked separately by creating one or more Journal Transactions, as detailed in this separate article" => That "separate article" is BLANK
@Tomi Gotcha. Not sure if you got my reply on that help centre comment section specifically, but this help centre article is for our users that are on our legacy software, so that is most likely the reason you are unable to see the content. If you check out my reply, I also give a snippet on how foreign exchange works in Wave.
Hello! I'm struggling to configure Wave understand that my account is in USD. This leads to a lot of problems, because my invoices in USd are automatically treated by Waves, but the transactions in the USD account are not. Please advise
Hey @Polyakova, thanks for reaching out. I would be happy to help get to the bottom of things. Could you explain a bit further what the issue is with your transactions? If you could provide screenshots that would be great! What is the default currency of your business? Thanks
I have this query... Lets say the business operates in some currency not USD (in my case EUR) but the clients purchase in USD and these are recorded in a USD account. What needs to be done when you want to transfer an amount from the USD account to your local bank account in your currency? How do you record the resulting conversion from USD to EUR and how to record bank fees related to the conversion for inclusion in the profit & loss statement?
hey @emmegi
So it depends on how your transfer looks, but if these accounts connected with the same bank connection they should be able to transfer seamlessly. If you select the expense transaction (money out) and categorize it a transfer to bank credit or loan your other currency account should show up (but only if they're under the same bank). This will create a transfer and account for the currency exchange. You can see in my example i have $500 USD transferred to my CAD account which was converted into $668.19 CAD.
Also you can do a journal transaction, but keep in mind that any value you enter in your journal transaction will always be in the currency native to your account. So you may need to do figure out what the currency exchange is in order to type in your values using a journal transaction.
I have question, if my functional currency is in USD and I have received bill from Canadian vendor in CAD currency, and I have recorded in my books that CAD bill by converting into USD amount based on the exchange rate on invoice date, and then later we have processed the payment in CAD dollar via wire transfer to such vendor when bills is actually dues from USD bank account.
Do I (payer) need to really record foreign exchange difference or just reduce/increase the bill expense which was recorded in USD?
I am also thinking that the person who will receive the money, they will also record any foreign exchange gain/loss, would it be double counting of foreign exchange gain/loss?
Please help me to understand this issue and what will be final conclusion.
Thanks in advance!
Hi @Tusharrathod . I know you paid in CAD, but whatever the amount is that converts to USD, I would create a Bill in that USD amount and mark it as paid. You then would not have to record any foreign gains/losses as you'd be recording the USD amount.
Hi, is the exchange rate updated daily or more than once a day?
When doing the end-of-month reconciliation, we noticed that for invoices issued in the same day, the USD to EUR exchange rate varies.
We also find it odd that we have the same exchange rate for 9 different days (the first being 5 September, the last 21 September).
Can you please clarify why this happens?
Thank you.
Hi @Rui_Farinha . I sent you a DM
Hi,
What should I do after I received payment? In our example, after I made record in unrealised accounts (income and assets), however then I get money. Should I just transfer amount into my assets between unrealised and cash? Or I need to recognise income twice as unrealised and then as realised?
Hi @Anuar779 . Can you provide some more info on your process from the beginning? I'm assuming you're create an invoice in a foreign currency and sending it to your client? Then they pay it and you're marking the invoice as paid?
Let me know. The more details the better.
I didn't make this transaction. I just need to understand the working principle of that kind of transaction, that I can use in future.
Hey @Anuar779! If you receive payment for an invoice in a different currency, it should be calculated accordingly. You just need to record a payment to the invoice from Sales > Invoices > Record a Payment. Once the payment has been recorded, if the payment date was on a different date to the invoice date, there will be either be a gain or loss on foreign exchange calculated. You can then head to: Reports > Account Transactions and search for 'Gain or 'Loss on foreign exchange to view the calculations. If you need to adjust the exchange rate, you can go back to: Sales > Invoices > Edit Payment and adjust the rate there.
If anyone has any questions on anything related to this article, please check out one of our Help Center articles below!
Frequently Asked Questions about Foreign Currency
Foreign Currency Invoices and Bills