Confused about invoice date rate vs payment date rate
Thread poster: Anders Uhlin

Anders Uhlin  Identity Verified
United Kingdom
Local time: 18:31
Member (2013)
Arabic to Swedish
+ ...
Aug 16, 2015

Hello,

I have clients in Sweden who want me to invoice them in Swedish Krona (SEK). My question is what rate to use for my bookkeeping, as the GBP/SEK rate on the date of the invoice will be different from the rate on the date of payment.

For example, let's say that on 01.07.2015, I invoice a client an SEK amount equalling GBP 1000.

I receive the payment for the same invoice on 01.08.2015, but since the exchange rate has changed, what I receive is GBP 995.

How do I enter this into the accounts, since GBP 1000 has become GBP 995?

I guess similar questions have been asked before on this forum but my search hasn't yet brought any resultsicon_smile.gif

I'm totally new to this kind of situation, where I have to invoice in one currency and get paid in another, so I would really appreciate your feedback.


 

Lincoln Hui  Identity Verified
Hong Kong
Local time: 01:31
Member
Chinese to English
+ ...
Invoice in the currency specified Aug 16, 2015

You invoice in SEK based on the current exchange rate and keep your books in GBP based on the final amount that you receive. You're entirely within your rights to charge extra for the inconvenience, but that's another topic altogether.

 

Tom in London
United Kingdom
Local time: 18:31
Member (2008)
Italian to English
Simple Aug 16, 2015

Regardless of the amount on your invoice, or the currency, the amount you *actually receive in GBP* is your taxable income.

A few days after you receive the payment your UK bank should automatically send you, by post, a statement for that payment, detailing the amount paid to them in SEK, the exchange rate they applied on that day plus any other charges, and the final amount they transferred to you in GBP. Each of these statements should be filed along with your copy of the invoice.

Your invoices should of course be in English, not Swedish, since your tax authority is HMRC in the UK.

[Edited at 2015-08-16 13:44 GMT]


 

xxxNorber
Germany
You can avoid this Aug 16, 2015

by specifying in your invoices both amounts, at the date you issue the invoice.
Just insert two columns for both currencies.
The client owes to you the amount specified on the invoice, even if he settles you at a later stage.


 

Anders Uhlin  Identity Verified
United Kingdom
Local time: 18:31
Member (2013)
Arabic to Swedish
+ ...
TOPIC STARTER
Invoicing in foreign currency Aug 16, 2015

That clears the matter. Part of my confusion was because I had earlier read somewhere that the exchange rate of the invoice date was the one to be entered.

Many thanks to both of you. Much appreciated.


 

Samuel Murray  Identity Verified
Netherlands
Local time: 19:31
Member (2006)
English to Afrikaans
+ ...
For your bookeeping, include both amounts Aug 16, 2015

Anders Uhlin wrote:
I have clients in Sweden who want me to invoice them in Swedish Krona (SEK). My question is what rate to use for my bookkeeping, as the GBP/SEK rate on the date of the invoice will be different from the rate on the date of payment.


If you do invoice-based accounting (e.g. if you are VAT registered), then your turnover is based on the invoice amount on the date of the invoice, converted to your local currency. However, if the actual amount that you ultimately receive is less or more, then you have to add that information to your bookkeeping system (e.g. as an exchange rate difference) in the same way as you'd add any bank charges or administrative fees to the bookkeeping as well.

So, if your invoice is in SEK but amounts to GBP 1000 on the date of invoice, and the client deducts GBP 10 for banking fees, and your bank deducts a further GBP 10 for its own fees, and the exchange rate changes so that you only get GBP 900 in the bank, then your bookkeeping should indicate that the invoiced amount is GBP 1000 on the date of invoice, and that you had costs of getting the money, amounting to GBP 10+10+80.

This means that your profit is GBP 900 and ultimately you'd be paying tax on that GBP 900. Whether you would put GBP 900 or GBP 1000-100=GBP 900 on your tax returns depends on your country's tax system and your tax accountant's whim.


[Edited at 2015-08-16 14:16 GMT]


 

Dan Lucas  Identity Verified
United Kingdom
Local time: 18:31
Member (2014)
Japanese to English
You can't ignore the difference Aug 16, 2015

Samuel Murray wrote:
If you do invoice-based accounting (e.g. if you are VAT registered), then your turnover is based on the invoice amount on the date of the invoice, converted to your local currency. However, if the actual amount that you ultimately receive is less or more, then you have to add that information to your bookkeeping system (e.g. as an exchange rate difference) in the same way as you'd add any bank charges or administrative fees to the bookkeeping as well.

In my case I raise it as a credit note to the client, but Samuel is - at least for UK accounting - entirely right. You must track the amount the invoice and account somehow for any differences between that figure the amount you ultimately receive.

Regards
Dan


 

Anders Uhlin  Identity Verified
United Kingdom
Local time: 18:31
Member (2013)
Arabic to Swedish
+ ...
TOPIC STARTER
Invoicing in foreign currency Aug 17, 2015

Many thanks to all.

 

TechStyle  Identity Verified
United Kingdom
Local time: 18:31
Currency pains Sep 4, 2015

Dan Lucas wrote:
In my case I raise it as a credit note to the client, but Samuel is - at least for UK accounting - entirely right. You must track the amount the invoice and account somehow for any differences between that figure the amount you ultimately receive.


I've had a similar issue a few times. For expenses claims, I just use the converted rate the credit card company actually charged, so, a US$100 purchase might show up on the statement as £60 - I just put £60 in the accounts as the cost. (Expenses claims are treated as invoices, so by converting to GBP there I don't have to account for conversions later.)

With invoices, usually the difference is explained by bank charges, so a client sending you a £1000 payment might actually only put £970 in the bank. I enter that as a £1000 invoice, a £1000 payment and a £30 bank charge, so everything balances. I think you're supposed to do the same thing on currency fluctuations - so if you gain or lose £10 on the conversion, treat it as a payment of the invoiced amount, then a payment/receipt of the difference with a nominal code of "currency variations".


 


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