Foreign currency transactions

Solution Properties

Solution ID:

222001000101256

Last Modified Date:

Fri Nov 24 14:53:28 UTC 2023

Taxonomy Path:

Case category//How do I...//governmental/legislative compliance

Author:

Dane.ridley@sage.com

Foreign currency transactions

Description

NOTE: This topic describes a premium feature. See Growing your business with Sage to learn more about upgrading your subscription.

If you trade with companies based overseas, you can process foreign currency transactions. This allows you to record invoices, credit notes, payments, and receipts in different currencies.

You can choose to use live exchange rates from the European Central Bank (ECB). These update daily so you’re always using the most up-to-date rate. You can also track any losses or gains because of changes in the rate.

Cause

Resolution

Before you start processing using different currencies, you need to:

Enable foreign currency transactions
Enter the correct currency in your contact records

Enable foreign currency transactions

Go to Settings, then Business Settings. In the Financial Settings section click Currencies.
Select Enable Foreign Currency Transactions.
To use the most up-to-date exchange rates from the ECB, select Use Live Exchange Rates check box.
NOTE: If you choose not to use live exchange rates, you must manually enter the rates for the currency. You can do this from here, or you can enter the rate when posting individual transactions.
We create three currencies for you, Euro (EUR), Pound Sterling (GBP) and US Dollars (USD). You can set up the currencies listed here. You can’t delete your base currency, Euro, or a currency that’s in use. If you need to delete any currencies not in use, select the Delete button .
To add a new currency, on the next available line, from the drop-down list, choose the currency you want.
TIP: If you choose to use live exchange rates, the latest rates from the ECB appear. When entering foreign currency transactions, we use the most up-to-date rate from the ECB. This is not the exchange rate as at the date of the transaction. You can overwrite the exchange rate if required. If you chose not to use live exchange rates, manually enter the rate.
Check or enter the following information:
- Bank Charges Ledger Account: This is the nominal ledger account used for any bank charges you might incur. If required you can change this
  For example, to keep a record of how much foreign transactions cost you in bank charges, you may want to use a separate nominal ledger account to the one you use for normal bank charges
  If necessary, you can create a new code from Settings. From the Accounting Settings section, click Chart of Accounts. For more information read our Review the chart of accounts article
- Exchange Rate Gains and Losses Ledger Account: If the exchange rate changes between creating an invoice and receiving or making a payment, the difference posts to this nominal ledger account
  This helps you keep track of how much you gain or lose through changes in the rates
Select Save.

You’ve successfully enabled foreign currency transactions and chosen your currencies. You’re now ready to check the currency settings in your customer and supplier records.

TIP: If you need to record interest and charges from your bank, you can enter this information when reconciling your account. Just click on the Interest and Charges option and enter the information, then click Save. For more information read our Reconcile your bank account article.

Check or enter the currency in your contact records

Go to Contacts and select Customers or Suppliers. Then select the required contact.
Go to the Options tab and in the Account Details section select Currency. Choose the required currency.
If you haven’t already done so, if the contact is VAT registered, enter the VAT registration number and ensure the address shows the correct country.
Select Save.

NOTE: If you've already entered transactions on an existing contact record, you can't change the currency. Instead, you need to create another contact record for the customer and choose the currency you want to use. For more information read our Create a customer contact article.

You’re now ready to start processing foreign currency transactions.

Process foreign currency transactions >

Once you’ve set up Accounting for foreign currency transactions, you’ll notice some differences. Your invoices, credit notes, quotes, payments, and receipts now appear in the relevant contact’s currency. You can see the exchange rate used and what the value of the transaction is in your base currency. You can also record any currency charges incurred.

To view details of the transaction, select the payment or receipt. This will include the foreign amount and exchange rate used.

NOTE: You can only pay an invoice that has been issued in the same currency. For example, you cant pay a GBP invoice in Euro. The payment will also need to be in GBP.

Journals, other payments, and other receipts are always posted in the base currency. You can’t enter quick entries using foreign currency. You can't enter an other receipt or other payment using a foreign currency bank account. You need to use the invoice option to correctly deal with foreign currency transactions. If you need to enter an invoice or credit note, please see the section below.

NOTE: If you use the Cash basis Scheme, the amount of VAT due is calculated from the values on the original invoice or credit note. Accounting calculates this automatically for you when you run a VAT Return.

Invoices, credit notes and quotes >

When entering invoices, credit notes and quotes, you should create them as normal. However, you should also consider the following:

The default exchange rate appears in the top section of the invoice or credit note. If you chose to use live exchange rates, this is the most up-to-date rate from the ECB. If you don’t use live exchange rates, this is the default exchange rate you entered in Business Settings. In either case, you can overwrite the exchange rate if required
Item lines shown on the invoice, credit note, or quote appear in the relevant currency for the contact
If you have products and services with a default price or rate, the price or rate converts based on the contact’s currency and the current exchange rate
The VAT Analysis window always shows the base currency. If this is a sales invoice or credit note, the PDF sent to the customer shows the net and VAT amounts for each VAT rate in base currency
If you enter values for the invoice, credit note or quote, then change the contact to one with a different currency. You’re then prompted to either convert the values or leave them as they are. If you convert them, the values update based on the new contact’s currency
If you convert a quote, draft invoice or credit note, the original exchange rate applies. If the exchange rate has changed since you created the quote or draft, enter the correct rate in the Exchange Rate box

For more information about how to enter invoices, credit notes and quotes, please see the following articles:

Invoice receipts and payments >

There’s extra information you need to check when recording a receipt or payment from within an invoice using foreign currency.

Go to Sales or Purchases then Sales Invoices or Purchase Invoices and select the required invoice then Record Payment.
Check or enter the following information:

Amount Received / Amount Paid*	Enter the total amount paid / recieved in the foreign currency. The amount in your base currency appears under Total Receipt.
Exchange Rate*	If you use live exchange rates, this is the current rate from the ECB. If required, you can overwrite this.
Paid into/from Bank Account*	Choose the relevant bank account.
Date Received *	Enter the date of the receipt.
Reference (optional)	If required, enter a reference for the receipt.
Currency Charges €	Enter any charges you incurred from your bank for this receipt. Currency charges always appear in your base rate.

Click Save.

Customer receipts and supplier payments >

You can enter customer receipts and supplier payments to record a payment for multiple invoices at the same time. You can also do this to record a payment on account in a foreign currency.

Go to Banking and select the required bank account.
Select New then from the drop-down list select Sale / Receipt or Purchase / Payment.
On the Customer Receipt or Supplier Payment tab, check or enter the following information:

Customer / Supplier *	Enter either the company name or reference, then choose the customer / supplier.
Paid into / out Bank Account*	Check the correct bank account appears. If you need to change this, choose the correct account from the drop-down list.
Date Received / Paid *	Enter the date received / paid.
Reference (optional)	If required, enter a reference for this receipt.
Amount Received / Paid *	Enter the total amount the customer has paid in their currency.
Exchange Rate*	If you use live exchange rates, this is the current rate from the ECB. If required, you can overwrite this.
Currency Charges €	Enter any charges you incurred from your bank for this receipt. Currency charges always appear in your base rate.

Select Save.

Customer and supplier refunds >

You can use the customer or supplier refund option to refund credit notes or payments on account in a foreign currency.

Go to Banking then select the required bank account.
Select New and from the drop-down select Purchase / Payment or Sale / Receipt.
On the Customer Refund or Supplier Refund tab, check or enter the following information:

Customer / Supplier*	Enter either the company name or reference, then choose the customer / supplier.
Paid from / to Bank Account*	Check the correct bank account appears. If you need to change this, choose the correct account from the drop-down list.
Date Refunded*	Enter the date received / paid.
Reference (optional)	If required, enter a reference for this refund.
Total Refund*	Enter the total amount you’ve refunded in the customer’s currency.
Exchange Rate*	If you use live exchange rates, this is the current rate from the ECB. If required, you can overwrite this.
Currency Charges €	Enter any charges you incurred from your bank for this refund. Currency charges always appear in your base rate.

Select Save.

To check your exchange rate gains and losses >

If the exchange rate changes between posting an invoice and payment or a credit note and refund, the difference in the rate is posted to the Exchange rate gains and losses nominal ledger account. This value appears on your Profit and Loss Report as an overhead.

To view the transactions that make up this value, select Exchange rate gains and losses. This shows the Nominal Activity Report where you can view an overview of each transaction. To view details of a particular transaction, select the relevant line.

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