Reconcile foreign currency transactions

Follow these steps if the statement line is in your organization’s base currency bank account, but the invoice or bill in Xero is in a foreign currency. For example, you’ve received a payment into your USD bank account for an invoice entered in EUR.

1. In the Accounting menu, select Bank accounts.

2. For the bank account you want to reconcile, click Reconcile [number] items.

3. For the relevant bank statement line, click Find & Match.

4. Clear the Show [currency] items only checkbox to display both base currency and foreign currency invoices or bills.

   

5. Select the checkbox for the foreign currency transaction. To help you find it, click any column header to change the transaction order, or search by name, reference or amount.

6. Click Reconcile.

Follow these steps if the bank statement line is in a foreign currency bank account, but the invoice or bill in Xero is in your organization’s base currency. For example, you’ve received a payment into an EUR bank account for an invoice entered in USD.

1. In the Accounting menu, select Bank accounts.

2. For the bank account you want to reconcile, click Reconcile [number] items.

3. For the relevant bank statement line, click Find & Match.

4. Clear the Show [currency] items only checkbox to display both base currency and foreign currency invoices or bills.

   

5. Select the checkbox for the base currency transaction. To help you find it, click any column header to change the transaction order, or search by name, reference or amount.

6. If the payment includes a bank fee for the foreign currency exchange, click Adjustments, select Bank fee, then add the fee details.

7. Click Reconcile.

Follow these steps if neither the statement and transaction in Xero are in your organization’s base currency, and both are in the same foreign currency. For example, your organization’s base currency is USD, but you’ve received a payment into an EUR bank account for an invoice entered in EUR.

1. In the Accounting menu, select Bank accounts.

2. For the foreign currency bank account, you want to reconcile, click Reconcile [number] items.

3. For the relevant bank statement line, click Find & Match.

4. Find and select the checkbox for the relevant transaction. To help you find it, click any column header to change the transaction order or search by name, reference or amount.

5. If the payment includes a bank fee for the foreign currency exchange, click Adjustments, select Bank fee, then add the fee details.

6. Click Reconcile.

How it works

If both the bank statement line and the bill are in different currencies and neither is the organization’s base currency, you need to reconcile these through a clearing account. For example, you have an EUR dollar bill that you’ve paid in USD, but the organization’s base currency is NZD.

Add a clearing account in your chart of accounts

Because the bill and payment are in different currencies, you need to use a clearing account in order to convert them both to the organization’s base currency.

If you don't already have a clearing account, add one:

1. In the Accounting menu, select Advanced, then click Chart of accounts.

2. Click Add Account, then fill out the relevant fields. Make sure you enter a descriptive name for the account. If you’re not sure what account type to select, talk to your accounting advisor.

3. Select the Enable payments to this account checkbox.

   

4. Click Save.

Reconcile the statement line with a spend money transaction

Because the statement line is in a foreign currency, you need to create a spend money transaction to convert it to the organisation’s base currency.

1. In the Accounting menu, select Bank accounts.

2. For the bank account you want to reconcile, click Reconcile [number] items.

3. For the relevant bank statement line, select the Create tab.

4. Fill in the transaction details. In the What field, select the clearing account.

5. (Optional) To add more details to the transaction, click Add details, enter the details, then click Save Transaction.

6. Click OK to create the transaction and reconcile it.

Check the Account Transactions report

Run the Account Transactions report to see the base currency value the foreign currency payment converts to. 

1. In the Accounting menu, select Reports.
2. Under Transactions, click Account Transactions.
3. Under Account, select the clearing account. 
4. Set a date range that includes the date of the bank statement line, then click Update.
5. Make a note of the base currency value the statement line amount converts to.

Record payment on the bill

Record payment on the purchase bill using the following details:

• Confirm the amount in the Amount Paid [currency] field is correct. Xero defaults to paying the bill in full. 

• In the Date Paid field, enter the same date as on the spend money transaction.

• In the Paid From field, select the clearing account you set up earlier.

• Enter the exchange rate to apply to the bill. To calculate the exchange rate, divide the bill's Amount Paid value by the base currency value recorded in the clearing account, as per the Account Transactions report.

The payment transaction is now reconciled, and the clearing account should offset to 0.00. You can re-run the Account Transactions report to check this.

How it works

If both the bank statement line and the invoice are in different currencies and neither is the organization’s base currency, you need to reconcile these through a clearing bank account for the same currency as the invoice. For example, you have an EUR dollar invoice that’s been paid in USD, but the organization’s base currency is NZD.

Add a clearing bank account in the currency of the invoice

If you don't already have a clearing bank account, add one:

1. In the Accounting menu, select Bank accounts.

2. Click Add Bank Account.

3. In the top right hand corner of the screen, click Add without bank feed, then click Continue.

4. Under Bank name and Account name, enter a name for the clearing account, such as [Currency] clearing bank account.

   

5. Under Account Type, select Other.

6. Under Account number, enter a placeholder number, such as 00000.
7. Under Currency, select the currency of the invoice.
8. Click Add account.

Record payment on the invoice

Record payment on the sales invoice using the following details:

• Confirm the amount in the Amount Paid [currency] field is correct. Xero defaults to paying the invoice in full. 

• In the Paid To field, select the clearing bank account.

Reconcile the invoice payment

1. In the Accounting menu, select Bank accounts.

2. For the bank account you want to reconcile, click Reconcile [number] items.

3. For the relevant bank statement line, select the Transfer tab.

4. Select the clearing bank account and enter the invoice number as a reference.

5. Under Currency Conversion, in the Amount [currency] field, enter the amount of the invoice.

   

6. Click Reconcile.

The payment transaction is now reconciled, and the clearing bank account balance should offset to 0.00. If you want to, manually mark the transactions as reconciled in the clearing account or archive the account.