How to invoice in different currencies
Much like invoicing in a foreign language, invoicing in another currency is usually seen as a courtesy to your customer and can make it easier for them to pay, but it does involve a bit more work on your behalf.
So whether you have a large international clientbase or only occasionally sell to customers abroad, it’s important that you understand whether you can invoice in another currency, how to convert your prices, and how to deal with any discrepancies in exchange rates.
Can I invoice in a different currency?
The regulations on invoicing in foreign currencies vary from country to country. In the UK, there are relatively few restrictions, and businesses can issue invoices in any currency they like. The only thing to bear in mind is that if VAT is due in the UK, the total amount of VAT needs to needs to be shown in pounds.
On the other hand, certain countries are more strict. In Ireland for example, if you invoice in another currency, you must always show the corresponding prices, tax, and the total amount due in euros.
As invoices are important legal documents that are essential for your accounting and tax returns, it’s always worth checking your country’s rules with your national tax authorities before issuing an invoice in another currency.
Invoices and exchange rates
One of the most important things to get right when invoicing in another currency is the exchange rate. You need to ensure that you use an up-to-date exchange rate so that your prices are accurate and you don't over- or undercharge your customer.
There are two standard ways of converting your prices to a foreign currency:
- Using the mid-market selling rate at the time the invoice is issued
- Using the exchange rates published by HMRC, known as the ‘period rate of exchange’.
Make sure that you convert both individual prices for specific items and invoice lines, as well as the total amount due. If you charge tax, it can be helpful to have the amount of tax due in the converted currency but – as previously mentioned – you may also need to show tax in your local currency.
Invoicing and exchange gains and losses
Exchange rates are always changing, and it’s fairly common for an exchange rate to change between issuing an invoice and receiving payment. If this happens, you’ll encounter something called an exchange gain or loss, which occurs when you either receive too much or not enough money due to changes in exchange rates.
For example, you’re based in the UK but have a customer in Denmark. You make a sale worth £50 and want to issue the invoice in Danish kroner. On the day you create the invoice, £1 is worth 8.31kr so, when converted, the total amount due is 415.5kr. The customer pays two weeks later, but between issuing the invoice and receiving payment, the exchange rate has changed. £1 is now worth 8.35kr, which means that the 415.5kr you recieve is now worth £49.76. You therefore encounter an exchange loss of £0.34.
If you do decide to invoice in different currencies, it’s likely that you’ll experience exchange gains and losses, and you’ll need to ensure that any gains or losses caused by changes in exchange rates are reflected in your accounting records. The exact way of handling an exchange gain or loss depends on whether the exchange rate has increased or decreased, and whether the gain is realised or unrealised.
Invoicing in foreign currencies with Debitoor
Once of the easiest ways to create and send invoices is with invoicing software like Debitoor. When you create an invoice with Debitoor, you’ll be able to select which currency you’d like the invoice to be in. You’ll be shown the latest exchange rate, which allows you to update your prices and total accordingly.
Plus, Debitoor helps you translate invoices into other languages with just a couple of clicks, making it even easier to sell to customers abroad.