Disclaimer: Please note this article is not financial advice. The purpose of our blog is purely educational, so please consult a professional accountant or financial advisor before making any financial decision.
The ecommerce landscape can be difficult to navigate, especially with many new currencies, regulations, and tax laws on the horizon. Accounting will be more challenging than it used to be. Multi-currency ecommerce accounting is a topic that scares many entrepreneurs. Luckily, multi-currency accounting software is here to help!
What do these tools have to offer for blossoming businesses like yours? This article will walk you through the basics of multi-currency accounting and show what this software can do for your business.
One of the most important things you need to know about ecommerce accounting is how it works with multi-currency transactions. If you're new to the ecommerce system, taking everything in won't be easy. So let this article help you with a quick discussion.
Let's say your company is based in the US, but you get product supplies from China and sell them to European clients. As you can guess, this will involve three currencies: USD, RMB, and EUR. Consequently, the following (but are not limited to) challenges may arise:
There are just too many things involved when dealing with foreign currency transactions. You can't simply calculate all the costs and generate a receipt in USD for these reasons.
Foreign transactions involve money more than anything else, affecting your bookkeeping and accounting operations the most. Here are specific processes that become more complicated and time-consuming when multi-currency is involved:
Suppose your ecommerce business deals with multiple currencies. In that case, you must find a way to avoid confusion and making mistakes.
Luckily, some ecommerce platforms or small business accounting software can solve your multi-currency dilemma: creating a multi-currency account.
It pays to use online accounting software that offers multi-currency features. These systems allow you to perform essential accounting functions while ensuring you accurately track and manage transactions in various currencies.
With multi-currency and entry-level accounting software, you can:
A multi-currency account is a single bank account that allows the holding, payment, and receiving of multiple money currencies. If you're selling internationally, this is a great advantage to reduce the hassle of complex rates.
Here's how it makes your business's financial operations easier when dealing with foreign payments:
Now that you understand its necessity, here's a basic overview of creating a multi-currency account. Take note that the process may differ per platform or software. Below is a general step-by-step procedure to give you a gist:
OFX is an example of an excellent international money transfer platform. The good thing about OFX is that it doesn't charge transfer fees and offers more reasonable rates than its competitors.
In addition, it supports 55 currencies and takes 1-5 days to transfer, depending on the location (unfortunately, it doesn't accept same-day transfers).
Here's an overview of how you can set up a multi-currency account on this platform:
The world is rapidly moving to digital reliance, and ecommerce is running in full force. Hence, businesses must ensure that their financial management system supports and adapts multi-currency accounting.
Otherwise, you'll have difficulty dealing with the overwhelming complexity of foreign rates. Before it gets to that, learn how to get financially native in foreign lands.
Now, we understand that this could be a lot of information. But don't fret; Unloop can extend a hand to help you organize foreign currencies! Whether you need bookkeeping in Calgary or other Canadian areas and across the US, Unloop can help ease your bookkeeping management duties through a remote setting.
We're ready to be your long-term business partner and help you with your bookkeeping tasks, such as calculating COGS and dealing with Shopify and Amazon corporate tax rates. OFX is also one of the tools we use for our services.
Book a call with us today or explore our blog section for more resources.
Unloop is the first and only accounting firm exclusively servicing ecommerce and inventory businesses in the US and Canada. With the power of people and technology, our team dives deep into COGS and inventory accounting. You are paired with a dedicated bookkeeping team that prepares accurate financial statements, financial forecasts, and can also pay bills or run payroll for you. Come tax time, everything is organized and ready to go, so you don't need to worry. Book a call with an ecommerce accountant today to learn more.