Just wondering.. because I live in Australia and most of my clients are from the US, I set prices in US dollars. Now, when I set up an invoice from Australia, I'm pretty sure it's supposed to be in Australian dollars. Due to the fact that the exchange rate is always in fluctuation, what is the right way to make invoices? Any help is appreciated.
If they are paying via paypal, they will know the conversion and etc... An invoice should have: - Address of Company - Who it is being billed to - Briefing of services / reason for paying - Relevant dates - How to pay - Numbers / Breakdown of pricing Just to be a nice guy you should offer the conversion option for clients when signing up to bill them in their choice of currency... Cheers,
I get that, but because I'm in Australia, the prices on the invoice have to be in Australian dollars, right? But if I make a note of the current equivalent in US dollars down the bottom at the time and they don't pay for 2 days, the figures are incorrect due to the exchange rate always changing. How can I avoid this problem?
If you set up a company you should have an accountant and he should know this ? I'm not sure the invoice has to be in AUD.. certainly if it's to an international client you can have an invoice in another currency. In your accounting you can setup a general ledger for currency differences, to which you book the difference between what was invoiced and what was actually paid. Or if you have a big company then you open a us$ account at the bank. People in Australia pay you on your AUD account, people in the USA pay on your us$ account..
If your Terms of Service say that you always bill in USD, and the client is aware of this at the time, then (barring any odd local laws I'm not aware of), I don't see any reason why you can't bill an Australian client in USD. Of course, it may just be easier to work out the AUS equivalent of the USD price at the time you invoice the client and just stick to that, but I doubt that it's *required*. Main issue is that, for an Australian client, you *may* have to add whatever the local sales tax is (GST?) at the appropriate percentage, even if that doesn't normally apply to your 'export' customers. Also, do you not have to convert everything back into AUS in order to compute your income tax liability in any case?
I always convert back to Australian the day I receive the money and record it in my cash receipts journal, for income tax. As for the local clients, that is easy enough and I will just add on GST. But as for the invoices, that sounds like what I need. I'll just put a note down the bottom saying that the prices are in US dollars and convert back when I receive it. Does this sound okay?
Currency fluxuations are something all international businesses deal with. The best solution for you would be to include a term in your contract that locks in the exchange rate on a certain day (for example, the day the contract is formed). You should specify the financial institution from which you are determing the exchange rate as well as the time at which the exchange rate will be locked.