I have got a small business where I act as an intermediary (I think is called triangulation). The supplier invoices me in GBP and I prepare my sales invoice to my customers in Euros. I receive payments from my customers in my Spanish bank and I pay my English suppliers also from my Spanish bank account.
I am not sure how I should be recording this. I have been recording all in the same accountancy package (kashflow). I have as a main currency the euro and enter my customer invoices in euros and when I enter my supplier invoices, I enter the bank exchange rate for that day to convert it in euros. When I look at the invoice I see the £ amount, when I create records I see the Euro but it's not clear to see and I believe it's not very accurate this way plus it will make it complicated when I start to allocate bank payments (there will be differences in the exchange rates).
Kashflow suggested that I should buy 2 packages; one for my purchase side in £ and another for my Euro sales which makes sense really but can PLEASE someone tell me if this is the easiest and correct way to do it or what should I have been doing instead?
you don't need two accounting packages for this, I would have to suggest that you stick to the currency in which you pay your tax in example if you are base in the UK and would have to pay UK taxes then your accounts should be in Sterling. I would just convert the invoices at the daily rate or use a fixed rate for the month if that makes it easier to post all your transactions.
Thank you for your help. I have got an offshore company in Mauritius but I am a UK VAT reg business. When I started using kashflow I put the euro as the main currency (I was not UK VAT reg then)...so the problem is that I have already issued invoices to my customers in euros and I can't change them. How to start from afresh now?? By the way, I think what I am doing is also wrong. I advertised the goods in euros and issue the invoices in euros. Shouldn't I be advertising the goods in GBP (with the estimate euro amount) and issuing my invoices in GBP (also showing the euro amount on it)?? If you or anyone knows, please I would be really grateful of any help on this.
By the way Alfred I have seen that you have an accountancy business. What I have is a small business and I am hoping to deal with all by myself however my partner and I are researching for a new co and I am keeping your contact, we will need an accountant for that one once si formed.
I am getting that you have a company in Mauritius and a company in the UK, if this is correct then you will have to treat them separate so you will have to use two packages in order to keep the activities of each company separate especially for tax purposes for each country. If you don't want to purchase another software you can use a good excel template to keep track of your activities instead for which ever is the smaller company. Also I am not a chartered Accountant, I am a bookkeeper, I provide Accounting support except for tax advice and audit work hope that helps clear things up, but I am always willing to help where I can if needed.
As Alfred advised the long and short is that your main currency should be the currency in which you will submit tax returns.
If your company is registered in Mauritius, will you submit annual accounts in Euros or GBP?
If GBP, then yes you should have Kashflow set as GBP for main currency.
We are UK based, so accounts are GBP, but we sell in Europe in Euros goods that we buy in Asia in USD.
Our accounts package is set in GBP, but handles both Euro and USD bank accounts and we have to account for currency exchange variations throughout the year and then at year end our accountants will make one final revaluation of Euro/USD bank balances, stock valued in USD, Debtors valued in Euros and creditors valued in USD.
This last revaluation is purely for tax purposes, but as our accounts must be submitted in GBP we have to revalue all other currencies at the year-end point.
