If you’re on a premium pricing plan with
foreign currency, you can create foreign currency invoices and bills in Xero, which simplify
the process for accounting currency gains and losses. In this example, we’ll use a bill but the
process is the same for a sales invoice. Start your foreign currency bill like you would any other bill
­ name, date, due date, all that sort of thing. The currency will default to your basic currency
or if you’ve set a default currency for a supplier, it will pick up that default and save it. These
rates come from XE.com and are automatically updated hourly into Xero so you always have
access to the most up to date information. What if you’re creating a bill for something
you’ve already paid at a set exchange rate or have negotiated a forward exchange rate for this
amount with your bank, then click on the Exchange Rate link where you can view more detail about
the XE.com rate and have the option to enter your own rate. Just enter the rate into the
box and you’re given the option to apply it to all transactions for this date. In this case,
we’re going to go ahead and use the XE.com rate. Complete the description, enter the Euro amount,
and approve. If you hover over the Euro symbol, you will see what the current value
is according to the most recent XE.com rates. Now let’s look at how to apply payment.
Select the date paid, the Euro bank account, reference if any, and add the payment and that’s it.
If you don’t have a Euro bank account and want to pay from a base currency account, easy. In another
bill, select the U.S. dollar bank account and you’ll see a box show. This is where you
put the rate at which it was actually paid out from the bank and Add Payment. Once the bank transactions
are in Xero, you can see the payments are here. If they are the same as it is here in
our account, great. We can match and reconcile. Sometimes, however, banks will add a fee to
an international payment. In that instance, go to the Match tab, find the payment we’ve just
made, and code the rest to Bank Feeds using the Adjustments option. Here is another payment in the U.S. dollar
account for another Euro bill we paid. We haven’t already applied the payment as we did above,
so let’s find the invoice. We need to ensure we untick the Show U.S. Dollar Items Only. Find
the invoice and apply this payment. Do double check for bank fees deducted and adjust accordingly.
If you’ve managed foreign currency transactions in other systems, this might
seem too easy. That’s because when you follow this method, Xero takes care of all the currency
calculations and automatically adjusts your accounts accordingly. Xero removes the need
to manually update exchange rates and create complicated journals to account for your multi­currency