Foreign Exchange Transactions and the QuickBooks Software.

How Quickbooks Tracks Foreign Currency Bank Account

Foreign Exchange Transactions involve purchases or sales in currencies different from your local currency, and as such, requires effective tracking of exchange rates as the exchange rate is known to be in constant fluctuation.

As a business owner who pays for services or transacts in other country’s currencies, you need a flexible and simple financial software that will help you track banking transactions on your domiciliary accounts and reports, realized or unrealized gain/loss, in a manner that is easy to understand.

We have been deploying QuickBooks for small businesses in different career fields, we have seen variations in foreign exchange transactions, and we have helped our clients found a lasting solution to tracking their Foreign Exchange Transactions using the QuickBooks. The tips shared here works well on Pro, Premier & Enterprise Edition of the QuickBooks.

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For over 5 years, we have implemented QuickBooks for several companies under Retail, Manufacturing, Oil & Gas, Real Estate & Construction, Travels, Hospitality,Legal, Co-operatives, NGOs, Financial & Service Sectors.
  • Mbaire Services Nigeria Ltd(Construction)
  • Chisco Transport Limited(Transport)
  • Lounge38(Hotel and Bars)
  • CTRL System Technologies Limited(Procurements)
  • Aristokrat 360 Limited(Creative & Media Agency)
  • Alpha Pharmacy (Health Care & Supermarket)
  • Ericsson Nigeria Multipurpose Co-operative Society (Co-operatives)
  • Fastanet Limited (ICT and Security)
  • Britanic Maritime (Maritime Service)
  • Olpharm Pharmacy (Health Care & Distributor)
  • Hawkes Legal(Legal)
  • Kantessa Limited(Fashion Store)
  • OPI Nigeria International Limited (Oil & Gas Servicing)
  • Zenilum Company Limited (Oil & Gas Servicing)
  • Lilygate Hotel(Hospitality)
  • Benstel Nigeria Limited(Bottle Water Production & Distribution)
  • Paraclete Nigeria Limited (Bottle Water Production & Distribution)
  • Josien Holdings Limited(Distribution)
  • Aisha Buhari Foundation (Futured Assured)(NGO)
  • Doheney HR Services(HR)
  • Insights Limited(Health Consultant)
  • Biddel Oil & Gas Limited (Oil & Gas)
  • System Intelligenz Limited(Contractor)
  • MagTech Information Security (IT)
  • Infusion Cakes Nigeria (Bakery)
  • Landmark Centre (Event Centre)
  • Travel Options (Travels)
  • Logos Travel Support & Solutions Ltd (Travels)
  • Germaine Auto Centre (Autos)
  • Starlight Nigeria (Retail)
  • Temple Private School (Education)
  • Value Mart Supermarket (Retail)
  • Transweb Bureau De Change (Financial Service)
  • Vektro Food Limited (Manufacturing & Retails)
  • Orient Petroleum PLC (Oil & Gas)
  • Plus More

Here are key outlines you should understand when recording Foreign Exchange Transactions in QuickBooks:

  • Activating multiple currencies.
  • Add your domiciliary accounts & exchange rate.
  • Updating your exchange rate daily, weekly or monthly.
  • Funding your domiciliary account via BDCs.
  • Transfers from your domiciliary account via BDCs.
  • Tracking unrealized gain or loss on your domiciliary account.

Activating Multiple Currencies 

The first step to exploring the multi-currency features of QuickBooks is to activate your home currency. QuickBooks accounting software generates your financial report in a selected home currency and as such, needs to know your currency built.

To activate multiple currencies in QuickBooks:

  • Go to Edit>Preference>Multiple Currencies.
  • Select “Yes! I use more than one currencies”.
  • Click the drop-down, view more currencies and select your home currencies – for the purpose of this guide, I will select Nigeria Naira as my home currency.

Add Your Domiciliary Accounts & Exchange Rate.

After activating the multiple currencies, the next step is to load all the domiciliary accounts held in their respective banks and their various balances. The same way you add your bank accounts in QuickBooks is also applicable here; but on the currency drop-down, select the currency in which the balances are held. For instance, if I want to add a USD domiciliary account, I will select US dollars under the currency list. The next step is to click “Enter Opening Balance” to add the US dollar balance as at selected date and then enter the latest exchange rate. You might ask; is it the CBN official rate or parallel market rate? Whichever one you are to choose will depend on the rate at which you fund your account.

N.B. QuickBooks is designed to automatically update exchange rate of companies whose home currencies are USD, EURO or GBP.  Exchange rates are relatively stable, and the presence of multiple currencies dealers is largely minimal. But, currencies outside these three requires manual updates.

Updating Your Exchanges Rate Daily, Weekly or Monthly.

As exchange rates fluctuate daily, you are also expected to update your QuickBooks Accounting Software so that all your foreign currency balances will reflect the current status of your business bank account, and if there is an unrealized gain or loss, the system will report accordingly.

To Update Your Exchange Rate In QuickBooks:

  • Go to the menu, select Company>Currency List.
  • Select the foreign currency you want to update and the rates, then double-click.
  • Select the date and enter exchange rate on the corresponding line.
  • Save.

Funding Your Domiciliary Account & Transfers to Your Domiciliary Via Bdcs.

A lot of people get it wrong here. I checked the financial record of a client in the construction industry and noticed that for every foreign currency they buy into their domiciliary account, they created a new bank account in the name of the bureau de change and assign the value of the purchases to the opening balance. These wrong postings led to duplicates in their chart of account.

A better way to fund your domiciliary account from your local bank account is to use the “transfer fund window”, a straightforward window that lets you transfer fund from one bank to another. What they could have done is to move fund into the domiciliary account from the local account in that bank’s currency using the exchange rate quoted by the buyer.

Tracking Unrealized Gain or Loss on Your Domiciliary Account.

Every inflow and fund domiciled in your foreign account is subject to exchange rate which might lead to an unrealized gain or loss for your business. An uptick in your rate increases the value of your balance, while a fall gives rise to a loss.

You can check your report under “Report”>Company’s & Financial, select Unrealized Gain or Loss.

Do you need support on how to track your foreign currency transactions in QuickBooks? Contact our client support center at info@accountingsoftware.com.ng or call 08105090001, 08084219399.

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