Currency
What is it
The monetary unit in which the prices and totals are expressed. Examples include USD, EUR, GBP. It dictates the value of the numbers.
When is it required
Always. A number without a currency symbol is ambiguous and legally insufficient. 1000 JPY is very different from 1000 GBP.
Regional currency regulations
| Region | Requirement | Tax Reporting |
|---|---|---|
| EU | Any currency | VAT amount must be converted to the local currency of the place of supply. |
| UK | Any currency | Total VAT payable must be shown in GBP (Sterling), even if the invoice total is in a foreign currency. |
| Australia | Any currency | GST amount must be in AUD or a clear conversion formula provided. |
| USA | Any currency | No specific federal restriction, but accounting records must be kept in USD for IRS purposes. |
Exchange rate conversions
When invoicing in a foreign currency while charging local tax (e.g. a UK company invoicing in USD), you must state the Exchange Rate used for the tax calculation. This often must be an official source like a Central Bank rate, not just a random market rate.
Common pitfalls
- Invoicing in a currency the client cannot pay in. This creates friction and delays.
- Failing to state the exchange rate if converting from another currency. This is required for tax reporting in the domestic currency.
- Using the same symbol ($) for different currencies (USD, CAD, AUD) without clarification. ISO codes (USD) are safer than symbols ($).
Common mistakes when filling the field
- Mixing currencies on the same invoice. This complicates the total calculation.
- Selecting the wrong currency code from a dropdown.
- Forgetting that bank fees often apply to foreign currency payments. The received amount may be less than invoiced.
Why is it there
It defines the value of the transaction. It ensures the sender receives the intended amount of money. It prevents exchange rate losses.