How do I best account for bank commission taken on payment of a French client's invoice?

Question asked by Keith Baddeley 9 years ago

Scenario: Sales invoices raised to French client for EUR 22.72. Client pays one month later by bank transfer and I receive GBP 17.60 in my UK bank account, the amount remaining after the bank has taken its GBP 1.00 commission for the currency exchange. The £1 commission is simply deducted from the funds they receive (i.e. it is not added to my normal monthly bank charges, charged separately).

Should I just add a payment against the invoice for the full GBP 18.60 (before the commission is taken) and then add a separate money out transaction for GBP 1 and explain this as Bank Charges?

I'm going to have many more of these going forward, so want to be sure I'm following the best way to handle this.

Many thanks for your advice! Keith

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4 Replies

Hi Keith - strictly yes, record both the money in and out. This does mean that, if importing a bank statement, you cant match/reconcile the net sum to anything and so you just delete it from the statement and tick the money in & out on the bank screen.

A workaround however is not to enter money in/out but to explain the sum on the bank statement by replacing the £17.60 with -£1 putting it to bank charges (this generates a negative sales invoice to bank charges to create the charge). The sum to then be explained will increase to £18.60 and this can be set against the invoice.

To enable this treatment you first have to tick the sales box next to the Bank charges account on the Account codes list, to make it available on the explain screen.

The technical problem with this method is if you are VAT registered in that the -£1 shows as a negative sale in box 6, not really a problem with such small sums of money.

Best answer
9 years ago

Hi Paul,

Really useful, thank you. I had already opted for your first option, despite also identifying the reconciliation issue when importing a bank statement. Although there are other entries I just delete from the statement and reconcile via a tick on the bank screen (drawings, for example), so I just need to remember this.

I'll also consider your workaround though, going forward.

Thanks again, Keith

9 years ago

I have a similar problem with a VAT registered holiday cottage business.

Scenario: A cottage holiday is sold by a third party travel agent for £100 (incl. VAT). A commission is deducted of £20 (incl. VAT) from this and retained by the travel agent. The travel agent pays the holiday cottage business the remainder of £80.

What is the best way of accounting for this in Clearbooks? I need to be able to reconcile the £80 in the bank account. I need to be able to claim back the VAT on the £20 commission.

Not sure I want negative sales on my VAT return and not sure I totally understand the first method.Do I delete the £80 monies received on the bank statement and then create two "false" entries of "money in £100" and "money out £20"? (within the same Bank Account) I would then need to import a sales invoice for £100 to reconcile against this payment.

6 years ago

Hi Richard,

The best way would be as a sales invoice with two lines. One for £100 and the other for minus £20, being the commission. This will not appear as a negative sale on the VAT return as the gross amount will account to £80 and so appear on the VAT return as a sale of £80.

All the best,

Mohamed.

6 years ago

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