Multi-currency accounting or invoicing rises as a necessity for many companies that must face various collections and payments in different countries, since when leaving the Eurozone companies are forced to adapt to the currencies of each state.
Globalization has been integrated around the world. Trade and finance are no longer what they were a few decades ago, since the immediacy in transport and the advantages of technological development have favored the appearance of thousands of SMEs and large companies that carry out commercial actions in different countries.
Invoicing in another currency: A Guide to Bringing It to FruitIon
Imports and exports are one of the main tasks of Spanish companies today.
Therefore, it is vital to know perfectly the market and the requirements necessary to operate according to the legislation in force in each country,especially in the area in which it is taxed.
When selling a product in a country where the currency is different, you have to agree on the currency in which the transaction is going to be made,although the most normal thing is that the transaction is made with the buyer’s currency.
Of course, be that as it may, we must bear in mind that exchange rates vary every day,so it’s important keep a correct record of the books of accounts to be aware of the expenses and income,especially if you are going to invoice in foreign currency.
Foreign trade generates in many cases significant income for companies, especially in technology-related or emerging sectors. Therefore, and even if invoicing is carried out in another currency,it is always necessary to take into account the legislation of the country in which taxes are paid, since errors when exchanging currencies usually cause problems, since these exchange rates are volatile.
This means that, regardless of the currency in which the orders are invoiced, taxes must be paid in the currency of the country in which they are taxed.
It is necessary to respect the deadlines and the amounts of the invoicing by making the conversion to the moneda, as is the Euro in the case of Spain.
Therefore, to avoid subsequent problems, companies usually include in the invoice the exchange rate of the moment in which the transaction is made, in order to leave the maximum possible record of the legality of the commercial action.
Multi-Currency Accounting in Companies that Bet on Foreign Trade
If the company has customers in several countries with different currencies, it is necessary to perform this type of accounting. To do it correctly, several considerations must be taken into account.
On the one hand, the currency in which the transaction took place must be included, as well as the ISO code of the currency,which is represented by three letters. For example, EUR corresponds to the Euro, and USD to the US Dollar.
In addition, the invoice must reflect the exchange rate established at the time of the invoice,based on the one that appears in the Bank of Spain.
It is important that the value of the invoices is correct, so as not to have subsequent problems with the annual income statement.
To make the task easier, there are professional advisors in
accounting and multi-currency invoicing.
How to Make a Dollar Invoice
Multi-currency invoicing and accounting involves a number of complications for the company, due to the complexity of international transactions,as well as the exchange rate set for each moment.
Within the currency types, the US Dollar, the Pound Sterling and the Euro are the most used internationally.
To make an invoice in dollars you must carry out the same procedure as if it were any other currency,so it is necessary to write on the invoice the exchange rate of the moment.
These invoices are usually issued if the buyer of the product or merchandise resides in the United States.. However, if the exporting company resides and is taxed in Spain, the relevant conversion must be carried out to adapt to the payment of taxes of the country of origin.
This usually generates problems, since in certain states the currency has so little strength that many companies do not want to invoice with customers from these places, due to the subsequent tax burden, both in customs and in the Tax Agency of Spain.
However, the dollar is a currency with great strength in the international market, since it is the one used to extract the rest of the exchange rates, in addition to being one of the main world economies.
Therefore, there are many Spanish companies that export products to the United States through multi-currency accounting or invoicing,since it brings great benefits to many SMEs and large companies in Spain.