Creating an invoice in USD is only half the story – discussed in my previous blog post. If your customer pays into a USD account (or other non-EUR currency account), the bookkeeping becomes slightly more complicated.
Now you need to handle foreign currency bank accounts in your Dutch EUR-based bookkeeping. Many bookkeeping packages offer only limited support for foreign currency bank accounts.
The problem
If your Dutch business receives payments in a foreign currency:
- You record invoices in EUR using the ECB exchange rate on the invoice date.
- You record payments in EUR using the ECB exchange rate on the payment date.
- Book any differences as exchange rate gains or losses.
But the running-balance of the USD account in your bookkeeping will most likely not match the actual balance (converted to EUR) of the bank statement at the end of the month. Because the rate changes every day…
How do you resolve the exchange rate difference at the end of the month?
This is where we are: all invoices you issued in foreign currency have been recorded at the FX-rate of the invoice date. Now you would like to book the bank transactions.
If you receive these payments to your EUR account – you only need to reconcile the customer owed balance with the payment, and book the difference to the Exchange rate differences ledger accounts (profit or loss). Most Dutch software handles this either automatically, or flags it for you to book manually.
However you cannot simply import a foreign currency bank statement to your software, you’ll need to convert it to EUR.
I have written a Converter solution for this myself, so I would not have to enter each transaction manually. If you have only a few transactions a month, it’s probably easier to just make these calculations yourself.
Once you have the transactions converted to EUR for each day – you can book them, and link the invoice to the payment, booking the difference:
Example: Starting point
Assume you have already:
- issued a USD invoice
- recorded it in EUR,
- received payment into a USD bank account,
- booked the exchange difference between invoice and payment.
I described this process in my previous blog here.
Before we continue, notice the two different type of exchange rate differences
- Exchange rate difference arising between issuing an invoice and receiving a payment.
- Exchange rate difference arising from holding a balance in a foreign currency bank account.
These should be considered separately.
Why doesn’t my USD bank account balance match my bookkeeping?
Because on each day the FX-rate is different. Even if you have zero transactions on your USD account, your balance calculated in EUR will very likely be different between the beginning and the end of the month. So let’s see how we handle this:
Steps:
- Calculate the ‘running closing balance’ in EUR: this is the cumulative sum of all transactions in the period. If you have entered this into your bookkeeping it will show this balance.
- Exchange the closing balance on the bank statement from the foreign currency to EUR using the FX rate of the last business day of the period (the the closing day of the statement).
- Book the difference between the running EUR balance and the real closing value in EUR as Exchange rate difference (it can be both negative or positive).
Booking
- Debit (for profit) or Credit (for loss) the USD bank account with the calculated difference.
- For Profit, Credit the Exchange Rate Profit ledger account.
- For Loss, Debit the Exchange Rate Loss ledger account.
Now your bank balance in your bookkeeping in EUR should match the value of the bank statement closing balance exchanged to EUR on the closing date of the statement.
A note on using AI to solve the manual booking problem
In bookkeeping software with an MCP, you can automate this process. I still suggest that you check the bookings and reconcile with your bank account regularly. Don’t forget: AI is as good as the person using it.
Frequently Asked Questions
Can I keep a USD or GBP bank account as a Dutch business?
Yes. Dutch businesses may hold foreign currency bank accounts. The transactions and balances must, however, be translated to EUR for bookkeeping and financial reporting purposes.
Which exchange rate should I use?
For incoming payments, you have two choices:
- Use the actual EUR amount your bank used when converting a transaction if conversion happened immediately when payment lands on an EUR bank account.
- Use a consistent reference rate such as the ECB rate and separately book any exchange differences. This method is used when the payment lands on a foreign currency account, and there is no conversion.
Do I have to use the ECB exchange rate?
No. Dutch bookkeeping only requires to use a consistent, publicly verifiable method. However, it is mandatory to translate foreign currency transactions into the functional currency (EUR), recognize exchange rate differences, and revaluing monetary balances at closing rates.
The ECB rate has several practical advantages. It is publicly available, independently published, easy to verify even years later and accepted by the Belastingdienst for VAT conversions.
What rate do I use on weekends?
Use the most recent ECB reference rate available before the transaction date.
Do I need to revalue foreign currency bank accounts?
Yes. At the end of a reporting period, the balance should be translated to EUR using the closing exchange rate, and any difference booked as an exchange result. As a minimum you must do this at the end of the year. If bookkeeping is done monthly or quarterly, I recommend to do the revaluation at the same time. The total exchange rate difference for the full year will be the same in either case.
A practical tip
If you only have a handful of foreign currency transactions each month, a simple spreadsheet and monthly reconciliation may be sufficient. If you process dozens of transactions every week, investing in automation can quickly save time and reduce bookkeeping errors.
Key takeaways
- Dutch bookkeeping must be maintained in EUR.
- Invoices may be issued in foreign currencies.
- Exchange rate differences must be recognized.
- Foreign currency bank balances should be revalued periodically.
- ECB reference rates provide a practical and widely accepted basis for conversion.
This article describes a commonly used bookkeeping approach. Depending on your circumstances, your accountant may use a different but consistent method for currency conversion.
Interested in more bookkeeping tips? Browse my blog or sign up to get access to my client portal in the Diligent track in which I offer tailor made support for entrepreneurs managing their own books.
