Transfers between multiple currency accounts - exchange rate issues
billysal
Member Posts: 4
Hi all,
I have bank accounts set up in Wave for multiple currencies, and when I move money from one account to another I create a transfer in Wave. However Wave insists on using it's own exchange rate, rather the one that was actually used to make my transfer (in my case the rate is set by Revolut on the day I made the transfer between accounts). This obviously results in the automatically created entry being incorrect. Although I can't change the exchange rate used (why???), it does seem I am then able to manually change the transaction amount. However, this then creates some very odd behaviour in the totals displayed for my accounts.
For example, below are three transactions, an invoice being paid in swiss francs, and a transfer created between my swiss franc and UK pound accounts. I have already adjusted the amount in the pounds transaction to match the actual amount credited to that account:
So far so good. But then when I look at my accounts using the drop-down, I get this:
As you can see, it's displaying the total in my CHF (Swiss Francs) account as being 0.00chf, but at the top it's showing it as being -£19.91! So it seems as though in one respect it has accepted the manual change, but in another it's still remembering the wave generated exchange...
So, firstly, can anyone tell me if that -£19.91 is actually affecting my accounts, or is it just a visual aid to show you the converted amounts in your default currency? If so can I ignore it's inaccurate reading?
Secondly, can we please just fix Wave so that we are able to specify the actual exchange rate used in a transfer between accounts. The same goes for invoices raised in one currency but then paid to a bank account with another currency. The bank decides the exchange rate used, so we need to be able to set that in order for the amount to match the invoice. E.g. I invoice a german client in Euros, he pays into my UK bank account, the bank converts the payment and I have a new transaction entry in £ that needs to be matched to the invoice in €, but I have to be able to set the exchange rate or there will be a mis-match.
Many thanks!
Billy
Comments
Hi @billysal , I did some testing in my Wave account, and reached out to our Wave Plus team to figure out exactly what the discrepancy in your screenshots represents, and what can be done here.
It looks like the amount that appears in the actual drop-down list (CHF 0.00) is the cumulative total of all of the transactions in the account, whereas the amount that appears at the top of the list (£19.91) is the balance of the account as it appears in your reports (you can see this same balance in your Balance Sheet).
The reason for the difference has to do with the fact that Wave's reports will always be generated in the default currency of your business. As a result, the totals there will be represented with an exchange rate applied (the mid-market rate from XE.com, the same one used when the transfer is created), and will likely not appear as £0, even if the account is fully reconciled.
At the same time, we want to make sure that the account is reconciled, and that the reporting for the account is also accurate at the close of your fiscal year. Reconciliation should be the focus during the year, but accuracy in your reports themselves will inevitably be the focus at year-end.
An adjustment can be performed at year-end to zero out the balance of the account in the Balance sheet. This can be done by adding an equity account called "cumulative translation adjustments." At year-end, credit/debit the bank account to clear its balance on the balance sheet, and credit/debit this equity account to record what was cleared. The transaction can then be reversed so that reconciliation can be performed normally heading into the next fiscal year.
As to the root cause here, foreign exchange is notoriously difficult, and every accounting software has difficulty executing it perfectly. For the time being, it is possible to enter in a custom exchange rate when applying an invoice payment from the Invoices page itself, but not from within the Transactions page, as you know. Improvements to the way we handle foreign currency are on our long-term roadmap, but this workflow will likely be necessary in the short term. Because of this, if there's anything I can help clarify at all, please let me know!
Hi @James_Hudson
I have a similar question. i do transactions in USD/CAD and when i transfer from one to to other they are automatically categorized as uncategorized expense and uncategorized income. I am able to select one of them and categorize it as transfer at which point it will try to find a matching transaction in the other currency, However i do not see an entry added under my foreign currency gains account. is transfer from one account to another in different currencies automatically handled in wave?
before the new UI, i remember reading having to create journal entries in foreign currency gain account etc.
Please advise.
Thanks,
Hi @jasonal! Thanks for reaching out here! This Wave guide on Transfers in Foreign Currency accounts should have information that will help with foreign currency transfers!