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WebPro25
January 24, 2025
Question

Multi Currency Challenge

  • January 24, 2025
  • 1 reply
  • 0 views

How do i receive payment in USD to my USD fx bank account and transfer it to my AUD bank account for receiving as a payment for an AUD invoice in QBO, so it reconciles correctly?
 
Currently I am invoicing my Canadian customer in AUD who pays me in USD into my FX Cash and cash equivalents account, which I then exchange for AUD in that account and transfer it to the Cash and cash equivalents AUD home currency account and Categorised as Accounts Receivable (A/R) AUD to then be applied to specific Invoice as payment.
Currently when I receive USD into my FX Cash and cash equivalents account I categorise as Accounts Receivable (A/R) - USD which can't be reconciled to the associated AUD invoice.
Therefore I have an unreconcilable amount in my Balance Sheet in Accounts Receivable (A/R) - USD.
 
Can I create a Clearing Account as Unapplied Cash Payment Income USD or Uncategorised Income USD instead of Accounts Receivable (A/R) - USD and when FX exchanged from USD to AUD in FX Account it could then be transferred to Cash and cash equivalents AUD home currency account?
 
I have read the QuickBooksHelp, Receiving and making payment for a foreign invoice/ bill with a foreign currency, about setting up a Dummy Account but is this the same as a clearing account.

 

Any help appreciated so I can reconcile and balance my accounts.

1 reply

J
Jovelyn_M1
January 25, 2025

Yes, WebPro25. Dummy Account and Clearing Account serve similar purpose for multi-currency transactions, typically a temporary holding account used specifically for recording transactions involving foreign currencies, helping to manage exchange rate differences during invoice/bill payments. Allow me to guide you about managing cross-currency payments in QuickBooks Online.

 

To begin with, we'll have to create a new dummy bank account in the home currency to facilitate the movement between two (2) different foreign currencies.

 

Here's how:

 

  1. Go to the Gear icon, then select Chart of Accounts.
  2. Click New.
  3. In Account Type column, select Cash and cash equivalent.
  4. Under Detail Type column, choose Cash on hand. 
  5. Next, in Name column, type in Dummy Bank.
  6. Before saving and closing, make sure that it is in the home currency (which is AUD in this case)

Next, we need to record payment of the foreign invoice. In the Receive Payment , set the Deposit To field to Dummy Bank. Before saving the transaction, take note of the home currency (AUD) amount displayed at the bottom right.

 

Lastly, we’ll have to transfer the created account with the right amount from Dummy Bank to the EUR bank account.

 

Moreover, I'm adding this article for future reference on how to reconcile your accounts, so that they always match your bank and credit card statements: Reconcile an account in QuickBooks Online.

 

Keep me updated by leaving a post if you still require assistance with managing cross-currency payments in QBO. Don't hesitate to hit Reply below, we'll get back to you.

W
WebPro25Author
January 25, 2025

Hi Jovelyn,

 

Appreciate the response.

To help ensure we are of the same understanding I wanted to share my exact process steps & how with you below so I can rectify my current 6 months of reconciled accounts for future correct processing in QBO.

 

My current process steps are as below:

  1. USD payment is received for AUD invoice in the USD FX Bank Account
  2. USD is exchanged at AUD spot rate in USD FX Bank Account
  3. AUD amount is transferred and deposited into AUD Business Bank Account
  4. AUD deposit in AUD Business Bank Account is linked to QBO and recorded in the Business Bank Account-Account Type Cash and cash equivalents-Detail Type Cash and cash equivalents-Home Currency AUD
  5. AUD deposit is then Categorised as a Transfer from USD FX Bank Account-Account Type Cash and cash equivalents-Detail Type Cash and cash equivalents-Currency USD with the Exchange rate from step 2
  6. AUD invoice is then identified for AUD deposit and applied as a payment
  7. Reconciling linked Business Bank Account-Account Type Cash and cash equivalents-Detail Type Cash and cash equivalents-Home Currency AUD monthly balances from monthly statements
  8. Reconciling un-linked USD FX Bank Account-Account Type Cash and cash equivalents-Detail Type Cash and cash equivalents-Currency USD requires manual transaction entry from monthly bank statements which has balanced

 

My problem seems to be that when Categorising the USD payment as Accounts Receivable (A/R) - USD in the un-linked USD FX Bank Account-Account Type Cash and cash equivalents-Detail Type Cash and cash equivalents-Currency USD it creates an un-balanced amount because it is not applied to an invoice.

  1. Would changing the Categorisation to Cash on Hand provide a solution?
  2. If not can you help me understand the steps to process in QBO once I have added this Dummy/Clearing FX Account with home currency AUD within an extension of the process steps above including how I achieve balanced reconciliation.

 

 

Many thanks for your assistance to get this right,

Phillip

W
WebPro25Author
January 25, 2025

Further thoughts.

 

Isn’t the USD FX Bank Account-Account Type Cash and cash equivalents-Detail Type Cash and cash equivalents-Currency USD effectively the real receiving and clearing account for USD payments of AUD invoices?

 

Perhaps the following is relevant to my situation:

  • Change USD FX Bank Account-Account Type Cash and cash equivalents-Detail Type Cash and cash equivalents-Currency USD => Detail Type Cash on hand

 

as the replacement for the Dummy/Clearing FX Account

with the exception that it is Currency USD instead of AUD

 

Therefore, instead of creating a Dummy/Clearing Account, would changing the existing FX Cash and cash equivalent account, which is a real bank account, Detail Type from Cash and cash equivalents to Cash on hand work?

 

Which raises the question.

 

Does the Currency matter if I am transferring into the Business Bank Account-Account Type Cash and cash equivalents-Detail Type Cash and cash equivalents-Home Currency AUD, the accurate AUD exchange amount from USD that was used when the exchange was done?

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