I recently turned on the multicurrency feature in a client’s QuickBooks Online file and I’m still learning how to use it. In this article, I will offer a few observations as a new user of this feature and things to consider if you think one of your clients may benefit from multicurrency.
Do Your Homework
Read the articles and Intuit docs on multicurrency before you flip the switch. Considerations include:
- Once you turn it on, it cannot be turned off.
- You must state one home currency (USD, CAD, etc.) for the QBO file.
- If you are using third-party apps, research how they might be impacted with multicurrency enabled.
- Understand that you have to create Customers in each currency; more discussion on this below.
- Understand the ins and outs of exchange rate gain/loss.
Note: This article will assume the home currency of the QBO file is US Dollars, or USD.
Things I Like About Multicurrency
1. Creates invoices with the proper currency icons. My client invoices some of her customes in Euros, some in Great British Pounds. Once we turned on multicurrency, the QBO invoices now show in Euros, instead of the “$” sign on invoices, or indicates “GBP” and the “£” sign for Great British Pounds. This makes the invoice look more professional and avoids confusion on the customer’s end regarding in which currency they are being billed.
2. Self-corrects in accounts receivable. What I mean by this is if your home currency is USD, and you create an invoice in, say, Euros, your A/R report will convert the currency behind the scenes and show the amount that is due translated into USD. That is helpful.
3. Provides the proper accounting for exchange rate gains and losses. When the exchange rate impacts the amount received in USD, the difference (Gain or Loss) will be automatically calculated and populated in a new Other Expense account, which is automatically created when multicurrency is enabled, called “Exchange Rate Gain or Loss.”
Things I’m Not Crazy About in Multicurrency
1. Double trouble: Customers. If your file has global customers who want you to invoice them in their local currency, you have to set up a customer for each currency. For example: Global Industries (USD) and Global Industries (Euros) would be two different customers.
Later, this impacts reports. If you run a “Sales by Customer” report for Global Industries, it will show all the sales in your home currency – QB converts the currencies received to USD amounts. That’s good.
However, let’s say you have previously billed this customer in Euros before you turned on multicurrency. Maybe you created an invoice in a Word document, or you sent the invoice from QBO, with the USD “$” sign, but wrote somewhere on the invoice a note for the customer to pay in Euros.
You then did a manual entry to account for the Exchange Gain or Loss. Remember that all Customers already in the QBO file when you enable multicurrency will be assigned the home currency, in this case USD. You will now have to create a second Customer record in Euros, for the same customer.
2. Double trouble: Vendors. Same situation as above, but for Vendors.
3. Double trouble: Reporting. So you may now have two Customer or two Vendor records, one in the home currency, one in a foreign currency. It can now get tricky when you run reports.
If you run, say, a “P&L by Customer” report, to see the profitability of Global Industries this year, you can filter the report and select both Global Industries (USD) and Global Industries (Euros), even though they are in two different currencies, and the report will be in USD. However, if you run a “Sales by Customer” report, you will get a different Income amount, because this report includes the “Exchange Gain or Loss” amount in the sales total (if it was a Gain), while the P&L keeps the Exchange Gain or Loss as an Other Expense – so the sales figures won’t match up between the two reports.
4. Exchange Gain or Loss has no Class. If you use Class Tracking, I have observed that the automatically created amounts which go into the Exchange Gain or Loss Other Expense account do not have a Class field. So any amounts in that account will appear in the “Not Specified” column on a P&L By Class report. This is annoying, and I hope is something Intuit can fix in a future release.
5. Receiving payments and making deposits. This month we had a not uncommon situation when the foreign bank sending the funds deducted a transaction fee for their service. So the funds received in the bank feed did not match the payment received for the invoice, to the tune of a $300 difference. Here is what we had to do:
1. Create a Clearing Bank on the Chart of Accounts.
2. Receive payment in full for the invoice, in the invoice’s currency.
3. Deposit the payment to the Clearing Bank.
4. Write a check from the Clearing Bank to transfer funds to the business checking as follows:
Row 1: Amount actually received per Downloaded transactions.
Row 2: Amount for international banking/wire fees, as a Bank Fees expense.
5. Match the deposited amount in the bank feed.
6. Verify the Clearing Bank account balance is now $0.00.
7. Verify the Exchange Gain or Loss was populated automatically (optional step, just for fun).
Didn’t find these instructions anywhere in the QBO Supplemental Guides or other articles I read about multicurrency, so you’re welcome!
In Your Pro Advisor Locker
- Quickbooks Online Advanced Certification Course, Supplemental Guide, Module 3: Special Transactions and Advanced Features. This has a good explanation of some manual manipulations you may need to do regarding the Exchange Rate Gain or Loss and the Balance Sheet.
Interestingly, I could not find a QBO 2017 Supplemental Guide which includes a discussion on multicurrency; I only found it in the QBO Advanced Guide noted above. If I am wrong, please let me know!
Free On the Internet
There are not many recent posts on the topic of multicurrency. And if you find an Intuit article, it may be outdated, so pay attention to the date of the article.
- Hector Garcia video from August 2015
- QB Power Hour post by Hector Garcia, also dated August 2015
- Accountex blog post by Esther Freidberg Karp using Multicurrency and Time Tracking dated Jun 2016
- Dummies article by Elaine Marmel
Enabling multicurrency is a great feature if you need invoices to clearly reflect your customer’s currency, not your home currency. After that step, let the buyer beware of the impact this feature has on other areas of the books.
Editor's Note: The above review is the viewpoint and experiences of the author and do not necessarily reflect those of AccountingWEB, its parent Sift Media or any of its valued affiliates.
Jody Linick is an AIPB Certified Bookkeeper and a QuickBooks® Certified Pro Advisor. Her company, FitBooksPro (formerly called Linick Consulting), specializes in remote bookkeeping services using hosted QuickBooks and QuickBooks Online. You can find her series of blog posts here.
Jody Linick, an AIPB Certified Bookkeeper, QuickBooks Certified Pro Advisor and member of the Intuit Trainer/Write Network, heads up FitBooksPro which specializes in helping professional services providers set business goals, and using the tools available in QuickBooks Online, to manage...