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How To Deal in Different Currencies
Currency exchanges are number one on the list of frustrations for entrepreneurs who are trying to do their own books. The bad news is that even large businesses with dedicated accounting departments struggle with currency exchange, but the good news is there is an easier way.
The big companies buy chunks of currency at a set rate, and buy inventory and goods out of that chunk. That can get confusing. (Did I buy this batch of widgets using the $1.27 rouble or the $1.35 rouble?) They have systems (and a large staff) to make it work.
As a small business owner it would be expensive and confusing to buy and hold big chunks of currency. So, what do you do?
The simplest thing to do is to look at your statements and enter the amount you actually spent. That way the conversion is done for you and you don’t have to fuss. So if you bought a course on your credit card and you paid in Yen, you would enter the price your credit card charged you in dollars. Simple and no fuss.
If the transaction never gets converted into your home currency and you can’t take a number off a statement, use your best guess. In this case let’s say someone paid you on Paypal in Euros and rather than convert them to dollars you buy something in Euros. You know pretty much how much your work is worth, so you can figure out how much what you bought is worth based on that. Keep it really simple and don’t stress over this task.
That’s all there is to it. Use the value on your statement whenever possible and if you can’t, use your best reasonable guess.
Tell me in the comments: what is your most pressing bookkeeping question.