Processing multi-currency payments
A challenge companies face when dealing in multiple currencies is the numerous steps required to convert transactions into their home currency properly. And, when there are lots of steps, there is lots of room for error.
Let’s review the anatomy of the existing multi-currency payment transaction to understand how a payment in a different currency is processed by PayPal.
There are series of transactions involved:
- PayPal debits your account in the currency that the buyer uses to pay for the product or service (Non-Home currency).
- PayPal converts the currency by selling (debits) this amount in your Home currency.
- Finally, PayPal creates a credit transaction by buying Non-Home currency in the exact amount of transaction #1.
Let’s walk through an example, shown below:
Your Home currency is set for USD
The payment transaction (#1 above) was for 8106.87 PHP + a PayPal fee of 252.83 PHP = 8359.70 PHP
Next, there are two transactions for the conversion of currency from PHP to USD.
- PayPal creates a debit transaction (#2 above) to sell 164.99 USD.
- Simultaneously, PayPal creates a credit transaction (#3 above) purchasing 8359.70 PHP to make the payment.
Subsequently, rate at which PHP currency was converted:
8359.70 / 164.99 = 50.6679 PHP per 1.0 USD
Here is how your Sync to Accounting app processes the same multi-currency PAYMENT transaction.
Our approach to processing a multi-currency payment transaction in the Sync to Accounting app is simple. The system will only process a single transaction out of the three described above, eliminating the need for a calculated conversion rate.
Here is an example of the same transaction below processed by Sync to Accounting.
- Transactions #1 and #3 will be ignored. They will fall out to “OTHER” types of transaction that should not be recorded.
- Transaction #2 will be passed to your accounting system with the exact payment amount in the Home currency of your QuickBooks Online account.