Loading Profile...
Handling PayPal Receivables
Now that the foreign currency handling is now in place (fantastic!), what is the advised best practice for representing the translation elements.
An invoice is raised using a foreign currency. Payment for that value is received in PayPal, but they deduct a transaction fee. The balance amount is transferred from PayPal account to current account.
When making a manual invoice receipt in to a FAC PayPal account, it asks for it to be reconciled to an invoice. However, this would show an artificially high currency loss.
How should we handle/represent this best in FAC. I assume that the PayPal transaction cost should be represented as a form of bank charge.
An invoice is raised using a foreign currency. Payment for that value is received in PayPal, but they deduct a transaction fee. The balance amount is transferred from PayPal account to current account.
When making a manual invoice receipt in to a FAC PayPal account, it asks for it to be reconciled to an invoice. However, this would show an artificially high currency loss.
How should we handle/represent this best in FAC. I assume that the PayPal transaction cost should be represented as a form of bank charge.
I’m pensive
1
person has this question
I have this question, too!
Tell me when someone answers.
The more people who ask this question, the more it gets noticed.
The more people who ask this question, the more it gets noticed.
The company marked this question as answered.
-
Inappropriate?Over to you Emily! I'm very interested in the method. -
Inappropriate?Hello Graham and Stuart!
Here's what I'd do:
Say you'd invoiced a client for $200, and he paid you in £ sterling.
At today's exchange rate that would be £125.40.
But you're actually only going to receive £120 because of PayPal fees.
So when you explain the receipt of £120, increase it to £125.40 (so that the currency loss isn't artificially high). Don't alter the amount in the foreign currency box - make sure it says $200 so that the invoice shows as paid in full.
FreeAgent will then put in another transaction, a payment of £5.40. Explain that as a Payment of Bank/Finance Charges.
Does that help, please?
Kind regards,
Emily -
Inappropriate?Clever and neat. I'm impressed.
-
Inappropriate?Thanks Emily, but my scenario may be a little different.
I invoiced $1,890.00, PayPal deducted $74.01 fees, leaving a net of $1,815.99, which was then converted to £1,093.50 and then transferred into my current account.
I have a FAC current account & a PayPal account set-up.
How do I show the translations between the accounts? -
Inappropriate?Hello Graham,
So you received $1,815.99 into your PayPal account?
Are you uploading your PayPal account transactions into FreeAgent, please, and if so, what figure do you see in £ sterling as coming into PayPal?
Kind regards,
Emily -
Inappropriate?Well yes & no. I received the full USD invoice amount (1,890), but the fee was deducted straight off, then the sum (1,815.99 ) converted to GBP (1,093.50).
No, I'm not using the PayPal > FC upload facility (yet).
PayPal gives me the choice to convert into GBP or leave in USD, I choose to convert, then I withdraw (transfer).
Thanks, Graham
I’m thankful
-
Inappropriate?Hi Graham,
OK, so what I would probably do, is in your FreeAgent PayPal account, record a manual invoice receipt of $1,890 (translated to £ sterling at the same exchange rate that PayPal used when they converted the net amount), so that the invoice shows as paid in full.
Then record a manual payment of bank charges for £ (the difference between $1,890 translated as above, and £1,093.50) from the PayPal account.
And when the transfer comes into your current account, explain that as a Transfer from Another Account > PayPal.
Does that help, please?
Kind regards,
Emily -
Inappropriate?Hi Emily,
Yes, that method works a treat - thanks.
I'll explore uploading PayPal statements, but overall, I guess it would be easier if PayPal were more accounting friendly.
Thanks again for your timely help, Graham
I’m happy
-
Inappropriate?Hi Graham,
Great - I'm glad that works well for you.
If you run into any problems with uploading PayPal statements then please do ask us for help.
Kind regards,
Emily
EMPLOYEE
