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Navigating Multi-Currency Accounting Basics and Embracing Multi-Currency Accounting Software

Michael Pignatelli
Last Updated on September 28, 2023

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.

Driving Down the Multi-Currency Lane: The Essentials of Multi-Currency Accounting in Ecommerce

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.

Unloop’s short infographic on the basics of multi-currency accounting

First Stop: Multiple Currencies as the Biggest Challenge for Ecommerce Businesses

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:

  • Your European client or Chinese supplier may ask you to create invoices in their respective currencies. Meanwhile, you also need to record the income in USD.
  • Overseas customers shopping on your ecommerce site need to see the product pricing in their default foreign currency.
  • You can’t simply accept payments with various currencies because dealing with and integrating them into your ecommerce platform can be confusing.
  • Complying with various ecommerce marketplace taxes like the Amazon tax rate can be challenging. You'll ask yourself, "How much tax do I have to pay on Amazon or Shopify?"

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. 

closeup shot of a person's hand with financial symbols coming out on a digital globe

Second Stop: How Does it Affect Bookkeeping and Accounting?

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:

  • Converting local and foreign currency
  • Incorporating the right sales value for international orders
  • Translating multiple currency values into a single currency for financial reporting
  • Accounting for assets (e.g., accounts payable and receivables, etc.) whose values change when the exchange rate does
  • Filing payment and other financial reports to the government where you need details of the currency received from international clients
  • Reconciling the ledger balance, which needs bank transactions outlined in relevant currencies
  • Tracking foreign exchange gain or loss when money transfers (one bank account to another from different countries).

Third Stop: Overcoming Foreign Currency Challenges With a Multi-Currency Accounting Software or Account

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.

What Can Multi-Currency Accounting Software Do For Your Business?

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:

  • Experience enhanced cash flow management despite possible currency fluctuations.
  • Perform multi-currency invoicing and billing.
  • View reports in your base currency that reflect the impact of foreign currency transactions.
  • Seamlessly integrate with your bank feeds and import bank transactions from different currency accounts.
  • Stay updated on exchange rate changes.

What Is a Multi-Currency Account and How Does It Benefit Your Accounting?

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:

  • Using only one bank account for all currencies
  • Spending less time with reconciliations
  • Fewer accounting adjustments involving different exchange rates
  • Avoid paying for foreign exchange commissions
  • Transferring money easily

Fourth Stop: What is the Basic Process of Multi-Currency Accounting?

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:

  1. Register an account for the specific platform.
  2. Determine the currencies and conversion rates you want to use.
  3. Define and set the main currency for your business transactions.
  4. Verify your account by complying with the requirements advised by the provider.
  5. Enter period, historical, and daily rates for translation and conversion.
  6. Update your rates regularly and post journals to update your account balances.
shot of a person using a laptop and opening a bank account online

Bonus Stop: How to Set Up a Multi-Currency Account using OFX

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:

  1. Register online or through their mobile app and fill in the important details.
  2. Complete registration via call. OFX will set up an appointment with you to ask basic and necessary questions (e.g., currencies and rates you prefer to use)
  3. Verify your account. OFX may request some documents and lead you to the Secure Site, where you must send the required documents directly.
  4. Wait for the approval and opening of your global currency account within a few business days.

Organize Foreign Currencies With Unloop's Bookkeeping Services

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.

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About unloop

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.