How to Activate Multi-Currency in QuickBooks
“I’ve got a simple question for you,” she said. “How do I turn on multi-currency in QuickBooks?”
Simple? I had to pause for a second. It isn’t hard to answer, really. I paused because I knew what was about to happen.
The technical aspect: Activating multi-currency in QuickBooks
It depends on whether you are using QuickBooks Desktop or QuickBooks Online. If you are using the QuickBooks Desktop accounting software, go to the Edit menu > Preferences > Multiple Currencies, select Company Preferences, and tick the box. QuickBooks Online (QBO)? Click the Gear icon > Account and Settings > Advanced tab, find the Currency, and flip the switch.
Boom. It takes less than a minute, maybe five to ten if you’re cautious and want to back up before switching. (And yeah, you can back up QBO if you’re on the Advanced plan.)
The QuickBooks Help file even has step-by-step instructions. But here’s the thing – activating multi-currency is only the first step.
And then reality hits
After the initial ‘simple’ question, a flood of ‘complex’ queries would follow.
“Hang on, where exactly do I put the exchange rate?”
“My invoice doesn’t show any exchange rate anywhere.”
“How’s QuickBooks supposed to know this supplier uses USD instead of SGD?”
“Uh oh, the customer paid at a different rate than what I invoiced.”
“They sent AUD instead of the USD I asked for. Now what?”
“I took out SGD, went to the money changer, and got CNY. How do I even record that mess?”
“What if the money goes through some middleman in China first?”
“Should I be using today’s rate or last month’s rate or what?”
“Which rate am I supposed to use when I close the books?”
“Someone mentioned currency revaluation—is that a thing I need to worry about?”
“I’ve got this deposit sitting there from 2022 in foreign currency, and now I want to use it against a new invoice…”
“Credit notes in foreign currency—seriously, which rate do I use?”
It just keeps coming.
Invoiced and paid in foreign currency.
(A simple example)
If you invoice a customer for US$10,000 at an exchange rate of 1.35, this would convert to S$13,500 and would appear in your books. All good.
The customer made a payment a few months later, and the remittance advice states: The customer remitted US$10,000, with a bank fee of US$40. The exchange rate was 1 USD to 1.2853 SGD, and S$12,801.58 was received into your SGD bank account.
This is not a technical question about how to use QuickBooks, but rather an accounting skill the accountant needs to apply. So now you’re staring at three problems:
- Do you accept US$10,000, settle the outstanding amount, and ignore the US$40 bank fee?
- Do you need to record a journal entry for the bank fee of US$40 and use it to offset the outstanding amount?
- Your books show S$13,500 outstanding, but you received only S$12,801.58. How should you account for the difference?
Confused? That’s why I paused when she said she had a ‘simple’ question to ask.
Can QuickBooks help me?
There is nothing wrong with QuickBooks. The buttons and menus work perfectly when you know how to operate them. The issue is, some people don’t.
QuickBooks is accounting software that helps you manage your accounts, but you need to apply your accounting skills and knowledge to make it effective. You can think of QuickBooks as a car; you need to use your driving skills to get where you’re going without crashing.
If you hear “unrealised foreign exchange gains and losses” and immediately understand what it means and how to handle it, go ahead. You’ll be fine.
If that phrase makes you “Huh!”, then get some training first, or find someone who deals with this stuff every day to help you out. If you are an admin, helping with accounting data entry, or only have limited accounting knowledge, then multi-currency accounting is a different beast. Paying someone (e.g., an outsourced accountant ) upfront to get it right costs way less than paying someone later to fix the mess.
Turning on the feature takes less than a minute, but understanding how to use it?—That’s a whole different story.