Hi, I am being so stupid I am trying to convert currency (new client who invoices in Euro's - don't have bank statements etc so using HMRC exchange rates monthly tables)
I have never ever been able to get the hang of this.
So using hmrc exchange rates for April 2014 1.1954 so 1EURO = 83p
Sales invoice 1241.00 EUR
1241 x 0.83 = £1030.03
Used google currency converter (just to check I am on the right track, I know it's going to be different) and 1241.00 comes out at £884.07
So this is a bit worrying am I going about this all wrong or has the exchange rate really changed that much in just over a year?
Don't panic - this always hurts my brain as well. I think it is just the shift in the Euro. Google will be using the current rate so:
£884/1241 = 0.71 so quite a big difference in the exchange rate which will give you the different figure. If you divide your original answer by the euros you get your original exchange rate. If you look at historical exchange rates it bears this out
You weren't being a dunce at all! (unless I have got it all wrong)
I think its somewhere round the 70p mark from memory. A couple of months ago I purchased a bookkeeping template for around 120 euros. I was expecting to pay around the same in sterling so I was pleasantly surprised when I found it was around £82, so your google check compares similarly.
This chart probably helps and you can see how its drifted in the last year, so you can safely remove your dunce cap
Hi
Short answer (1) google rate is ( I understand) the mid CASH rate and you should be looking at the mid COMMERCIAL rate, which is what HMRC use. There is a very noticeable difference between these two types of rates/then there is a difference between the buy and sell rate.
(2) HMRC is only an average of these mid commercial rates anyway - they do weekly updates if you need to adjust more frequently
(3) never use your one euro to one pound conversion to convert the whole lot(ie 83p in your example as thats not very accurate anyway, should be 83.654pence - which is why you should always use the actual exchange rate to convert the total)
(4) the euro has tanked since last year and again in May 2015.
(5) If this clients pay in sterling, always get the accurate rate from the Bank on the day of conversion (note they use 3-5 decimal points). Also worth considering using software that can track in euros? Pretty sure the new sage can, although Ive not tested it!
(6) Consider opening a euro account and if there are big sums involved in the actual invoicing consider using some kind of forex tool to iron out the fluctuations (speak to the Bank)
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
am I going about this all wrong or has the exchange rate really changed that much in just over a year?
