Entering Multi-Currency Transactions in QuickBooks Online

Quite some time back I created some videos to show you how currency transactions work in QuickBooks Online. Since then, QuickBooks looks different, and there have been improvements in how currency transactions are matched. I thought it might be time to redo the video! If you’re not familiar with QuickBooks Online, you might be tempted to just enter everything with a 1 for 1 exchange rate thinking that you can clean it up at your end, or get your accountant to do it! There’s no need to do this. Multi-currency in QuickBooks Online works seamlessly if you just know how to use it.

Once you enable multi-currency under the  "Advanced" settings and select your home currency you are ready to go!

Be sure to set up your customer and vendor or supplier with the correct currency and entering a bill or invoice in a foreign currency is a breeze. QuickBooks Online will automatically handle exchange rates for you. When it comes to reports, you'll see the transactions accurately recorded, even accounting for exchange rate differences.

Whether you're dealing with accounts payable or accounts receivable, QuickBooks Online takes care of setting up the relevant accounts for you.

I hope this brief overview has piqued your interest in mastering foreign currency transactions in QuickBooks Online. If you want to learn more and see a step-by-step demonstration, be sure to watch the full video on my channel. Don't forget to like and subscribe for more helpful insights.

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Hi, Kerry here from My Cloud Bookkeeping. Some time back I created some videos to show you how foreign currency transactions work in QuickBooks Online and since then QuickBooks looks different and there have been some really great improvements in how currency transactions are matched and recorded. I thought it might be a good time to redo the videos.

Now, if you're not familiar with QuickBooks Online you might just be tempted to enter everything at a one for one exchange rate thinking that you can recalculate and clear it up at year-end or your accountant can clear it up for you but there's no need to do this. Multi-currency and QuickBooks Online Works seamlessly if you just know how to use it, so let's set it up and walk through a transaction.

Here we are in a sample company and if you want to turn currency on you pop up here to the gear icon on the right and we go to account and settings.

Multi-currency will show up under advanced and we scroll down and here's currency. Now as you can see this is already turned on. If it wasn't there would be a pencil icon on the right and you would turn it on. Now a big scary warning is going to come up to say that you can't turn it off and I don't understand why there's that big scary warning because turning on currencies isn't that big a deal except that some of your reports are going to have some annoying columns out to the right with different currency variations on them that you can very easily exclude, actually I wish they wouldn't have them there but you can go ahead turn on currency and this is where you select your home currency.

I'm using a Canadian sample company and the home currency is Canadian dollars. There might be circumstances when you want to have a home currency that's different to the country that you're in. Some people will be using for example US dollars if they've got multiple entities or maybe a Euro. So this is where you choose the currency that you want most of your transactions and your reports to be in. Typically it's going to be the same country that you're in.

What I'm going to do now is set up a new vendor or a supplier whichever version your QuickBooks says and we're going to make sure it's in the currency we're going to be doing the transactions in. As I mentioned home currency is Canadian so I need to choose which currency this particular vendor is and now this is a warning that is important. Once you've created the supplier you cannot change the currency so do make sure that you get this correct the first time otherwise you have to back stuff out, make it inactive it's a bit of a mess, not insurmountable but a mess. Yes we want our supplier to be in US dollars. So, what name will we give to this supplier? I’m not feeling terribly imaginative today.  I'm going to go with “new supplier” and click save.

So now I'm going to enter a bill.  I'm going to say new bill from new supplier in US Dollars. I'm just going to pop it back to last month. It just makes it a little easier for running the reports for the category. Let's get some computer and internet expenses for 10 000 US dollars so I'll actually make it a thousand. I'm going to ignore sales tax for the sake of this exercise. Normally you will have sales tax and we're not going to make it billable or anything else, we're simply going to buy some computer and internet expenses for 1 000 US dollars. The rate that's come up here is the rate that QuickBooks is pulling for this day. Just to make it a little easier for our example I'm going to go with 1.25. I just want it to be for this transaction only so you can see exactly what's happening and then we click save and close.

What I'm going to do now is run a profit and loss report so that you can see the transaction that came through last month. If we have a look here we have computer and internet expenses of 1250 so let's click through and see what's in here. The only thing in here is our purchase from the new supplier and you see that it shows up as 1 000 US dollars with the exchange rate of 1.25 creating an expense of 1250. So, we can see that that has worked beautifully so now we're going to go and pay that supplier. We're going to go new, pay bills and we have to change the currency to be US Dollars and we're going to pay our new supplier today. I'm going to say that today the exchange rate is 1.3. Keep in mind that the rate that QuickBooks pulls up is totally fine, if you want to go and look elsewhere to search out different rates you you can I haven't had any problems with using the QuickBooks reads I'm only changing it so that we can in this exercise have some easy numbers to work with. So we're going to have an exchange rate of 1.3 we're paying this on the 7th of June and I'm going to click save and close.

Now let's have a look at our income statement. It goes right through until June 7, which is today, so I'm going to run this report again, just refresh it, and we still have the computer and internet expenses of 12.50 even though when we paid it was 1.3. So let's scroll down here we have an exchange gain or loss of 50 and this is the difference between the 1.25 exchange rate when we purchase the items and the 1.3 when we paid for it so you can see that QuickBooks has very easily been able to calculate and exchange gain or loss based on the changes in exchange rates from the date that you purchased to the date that you paid.

Now another thing you might be thinking is how do I set up an accounts payable or an accounts receivable account in a different currency? Let's just go and have a look and see what happened to our balance sheet at May 31st which was when we had that unpaid bill. I'm going to switch it back here to last month.  I'm going to run a report. If we scroll down here we can see that we have accounts payable US dollars for 1250. We didn't create this account, QuickBooks did it automatically when we created the US dollar vendor and posted a transaction into it so this is not anything you have to be concerned about. But out of Interest let's have a quick look and see what shows up when we run an accounts payable report. I'm just going to pop into a new tab and grab an accounts payable aging summary. We want to change it back to last month and run the report and do we see here it's showing up in Canadian dollars actually on the balance sheet as well it was showing up in Canadian dollars. If we want to see what we owe that vendor in US Dollars, which is the currency that the expense was in, we need to go and have a look at the actual vendor. If we go here and we have a look at the new supplier you can see we owe them a thousand dollars. It can get a little bit confusing when you're looking at your reports because anytime you're running a report that includes a mix of Canadian and US or any other currencies, it's going to be shown in the home currency so you want to have a look at the actual source transaction or the vendor to  see the amount in their currency. I hope that's not too confusing. Selling in other currencies works exactly the same way. You set up a currency and the currency you'll be charging them, send the invoice and record the payment. So I hope that helps you to understand how currency transactions show up in QuickBooks Online. Reach out if you have any questions and if this video was useful click like below subscribe to my channel. If there's anything else you'd like to know about please let me know because my next video could be for you. Cheers.