How to record Shopify orders in another currency in FreeAgent

Selling abroad on Shopify means one order can involve three currencies. If you record your Shopify sales in FreeAgent, you need to know which one FreeAgent should see. Pick the wrong one and your sales, your VAT and your bank balances stop matching.

The three currencies in a Shopify order

Shopify describes three currencies:

• Store currency. The currency of your Shopify admin. You set your prices in it and your Shopify reports use it.
• Local currency (Shopify also calls it the presentment currency). The currency the customer sees and pays in at checkout.
• Payout currency. The currency Shopify pays into your bank account.

Customers can only pay in their local currency if your store uses Shopify Payments or Adyen. With any other payment provider, everyone pays in your store currency.

When a customer pays in a currency that is not your payout currency, Shopify converts the money and charges a currency conversion fee: 1.5% for stores in the United States and 2% for stores in the UK, the EEA, Canada, Australia, New Zealand and other regions. The fee comes out of your payout. On the Basic, Grow and Shopify plans, all payouts are in your domestic currency; payouts in more than one currency need a higher plan.

Which amount should go into FreeAgent?

For most UK stores the answer is simple: record the order in your store currency, the amount your Shopify reports show. A customer in France may have paid in euros, but if your store currency is GBP, Shopify shows the order in GBP too, and that is the figure that matches your Shopify sales report and your payouts.

You only need a foreign currency document in FreeAgent when your store currency is different from your FreeAgent currency. For example, a UK company whose Shopify store is priced in USD, or a store set up in EUR for European buyers.

How to do it by hand in FreeAgent

If your store currency is the same as your FreeAgent currency, create the invoice as normal. Nothing about currency changes.

If your store currency is different:

1. Create the sales invoice and set its currency to your store currency. Each FreeAgent invoice can only be in one currency, so one invoice per order works well.
2. Enter the amounts exactly as Shopify shows them in the store currency, including shipping and VAT.
3. FreeAgent converts the invoice to your base currency with its own exchange rates, which it takes from xe.com. You do not need to look up a rate.
4. Record the payment. How depends on the bank account you use for Shopify money in FreeAgent:
   • An account in the store currency. Enter the payment in that currency. FreeAgent keeps the account in its own currency and converts it for your reports.
   • An account in your base currency (for example GBP). Enter the amount received in pounds. FreeAgent then shows a second box for the value in the invoice currency, so it knows how much of the invoice is paid (FreeAgent's guide).

If the exchange rate moves between the invoice date and the payment, FreeAgent posts the currency gain or loss for you. You do not need a journal for it.

Why your payout will not match to the penny

Shopify converts the money at its own rate when it captures the payment and takes its conversion fee from the payout. FreeAgent converts your invoice at its rate for the invoice date. The two will rarely agree exactly. Small differences are normal: the conversion fee is a cost, like the card fee, and you record it from the payout as you do today.

If you are unsure how currency differences affect your VAT return or your year-end accounts, ask your accountant.

How Ledgerline handles other currencies

We are building Ledgerline, a Shopify app that sends each paid order to FreeAgent as a sales invoice marked as paid. On currency it follows the steps above:

• Every invoice uses the order's amounts in your store currency, the same figures as your Shopify reports, whatever currency the customer paid in.
• Orders are never skipped because of currency. If your store currency differs from your FreeAgent currency, the invoice is created in the store currency and FreeAgent applies its own exchange rate for the order date. In our test on a FreeAgent sandbox company in GBP, a USD 56.94 order became a USD invoice marked as paid, with GBP 48.28 recorded in the GBP bank account.
• When it records the payment, Ledgerline checks the currency of the FreeAgent bank account you chose for Shopify payments. If the account is in the store currency, it records the amount as it is. If the account is in your FreeAgent base currency, it records the converted amount plus the original amount, so the invoice shows as fully paid.
• If the bank account is in a third currency, Ledgerline does not guess. It stops that order and tells you in the sync log to choose a bank account in the store currency or your base currency in Settings.
• The settings page warns you when your store currency and FreeAgent currency differ.
• Refunds follow the same rules, so a credit note uses the same currency as its invoice. (See how Shopify refunds become FreeAgent credit notes.)

Ledgerline does not record Shopify's fees, including the currency conversion fee. Record those from your payouts as you do today.

Ledgerline is in review for the Shopify App Store and not available yet. Leave your email below and we will tell you once when it is live. For the other options available today, see FreeAgent Shopify integration discontinued: what to do now.

More Shopify and FreeAgent guides

• FreeAgent Shopify integration discontinued: what to do now
• How to record Shopify sales in FreeAgent (step by step, works today)
• Shopify and FreeAgent VAT a penny out? Why it happens and how to fix it
• How to record Shopify refunds in FreeAgent as credit notes
• How to match Shopify payouts and fees in FreeAgent with a clearing account

Ledgerline: Shopify to FreeAgent