Exchange Rates on Invoices
Exchange rates become important when an invoice is issued or paid in a currency different from the currency a business normally uses for its accounts. Understanding how currency conversion works can help businesses create clearer international invoices, maintain accurate records, and understand how much a foreign currency payment is worth in their local currency.
This guide is part of our International Invoicing Guide hub.
How do exchange rates affect invoices?
An exchange rate shows the value of one currency compared with another. If you invoice an international customer in a foreign currency, the value of that invoice in your own currency can change as exchange rates move.
For example, a UK freelancer might invoice an overseas client USD 1,000. The amount requested from the customer remains USD 1,000, but the GBP value of that payment can change depending on the exchange rate.
This means the amount recorded when an invoice is created and the value of the payment when it is eventually received may not always be identical in your local currency.
When is currency conversion needed?
Currency conversion may be needed when your business invoices customers in currencies different from the currency used for its accounting, tax records, or financial reporting.
A business may also need to convert an amount when preparing financial statements or recording the value of an international transaction.
The exact requirements depend on where your business operates and the accounting and tax rules that apply, so businesses should check the guidance provided by the relevant tax authority or accountant.
Which exchange rate should you use for an invoice?
The appropriate exchange rate can depend on why the conversion is being made. A business may use a rate provided by its payment provider, bank, accounting system, or an exchange rate required by the relevant tax authority.
If a particular exchange rate must be used for tax reporting, follow the rules that apply in your country rather than choosing a rate simply because it produces a more favourable converted amount.
Keeping a record of the exchange rate and its source can also make it easier to understand how a foreign currency transaction was recorded later.
Do you need to show the exchange rate on an invoice?
An exchange rate does not always need to appear on the invoice sent to the customer. If you agreed that the customer will pay USD 1,000, for example, the invoice can simply request USD 1,000 without showing its current value in another currency.
There may be circumstances where additional currency information is useful or required, particularly for accounting or tax purposes.
If you decide to show a converted amount, clearly identify the original invoice currency, the converted currency, and which amount the customer is actually required to pay.
Example of an exchange rate on an invoice
Imagine a UK consultant invoices an international customer EUR 2,000 for consulting services. The invoice requests payment in euros, but the consultant also needs to record the transaction in pounds for business records.
If the exchange rate used for the relevant accounting purpose were EUR 1 equals GBP 0.86, the example could be recorded as:
- Consulting services: EUR 2,000
- Invoice currency: EUR
- Example exchange rate: EUR 1 equals GBP 0.86
- Example converted value: GBP 1,720
- Amount payable by customer: EUR 2,000
Exchange rates can change before payment
International invoices are often paid several days or weeks after they are issued. During this period, exchange rates can rise or fall.
If you invoice a customer in their currency, the customer may still pay exactly the amount shown on the invoice while the value you receive in your own currency changes.
Businesses that regularly work with overseas clients should therefore consider exchange rate movements when setting prices and agreeing which currency will be used.
Currency conversion fees and international payments
The market exchange rate is not necessarily the exact rate a business receives when converting an international payment. Banks and payment providers may use their own conversion rates and may also charge transaction or conversion fees.
As a result, the amount that reaches your account can differ from a simple currency conversion calculated using a published exchange rate.
Before accepting international payments, check how your chosen payment method handles foreign currencies and any fees that could affect the final amount received.
Keep exchange rate records
Keeping clear records is useful when your business regularly creates foreign currency invoices. Your records can show the original invoice amount, invoice currency, relevant exchange rate, converted value, payment date, and amount eventually received.
This can make bookkeeping easier and provide a clearer history of international transactions.
Businesses should also retain copies of their invoices and other relevant transaction records according to the accounting and tax requirements that apply to them.
Avoid unclear currency conversions
An international invoice should make it obvious which amount the customer needs to pay. Avoid displaying several converted totals without explaining their purpose.
If the invoice requests payment in EUR, USD, GBP, or another currency, clearly identify that currency alongside the balance due.
Any additional converted figure should be labelled appropriately so it is not mistaken for a second amount that the customer is expected to pay.
Create a foreign currency invoice online
InvoiceAtlas allows you to choose from multiple currencies when creating an invoice, making it easier to bill domestic and international customers using the currency agreed for the transaction.
You can add your business and customer information, enter products or services, set rates, apply taxes or discounts where appropriate, and clearly display the final balance.
Once completed, the invoice can be downloaded as a professional PDF and sent directly to your customer.
Frequently asked questions
What is an exchange rate on an invoice?
An exchange rate represents the value of one currency compared with another. It may be relevant when an invoice is issued in a foreign currency but needs to be converted into another currency for accounting, tax, or reporting purposes.
Do I need to put the exchange rate on an invoice?
Not necessarily. If the customer has agreed to pay a fixed amount in a particular currency, the invoice can clearly request that amount. Additional exchange rate information may be useful or required depending on the transaction and applicable accounting or tax rules.
Which exchange rate should I use for an international invoice?
The appropriate exchange rate depends on why the conversion is required and the accounting or tax rules that apply to your business. You may need to use a rate from an accepted source or one specified by the relevant tax authority.
Can the exchange rate change after I send an invoice?
Yes. Exchange rates continually change, so the value of a foreign currency invoice in your local currency may be different when payment is received from when the invoice was originally issued.
Should I show two currencies on an invoice?
You can show a converted value where useful or required, but clearly state which currency and amount the customer is actually expected to pay to avoid confusion.
Can I create foreign currency invoices with InvoiceAtlas?
Yes. InvoiceAtlas supports multiple currencies, allowing you to select the appropriate invoice currency and download the completed invoice as a professional PDF.
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