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How to reconcile SEK & PLN settlements in Xero

What to do when you receive SEK or PLN settlements in Euros when your home currency is GBP

Rachel Jones avatar
Written by Rachel Jones
Updated over a week ago

There is a limitation within Xero & QuickBooks that doesn't allow you to match foreign currency invoices or bills to a 3rd foreign currency.
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SEK and PLN settlements are being converted by Amazon into EUR but then your home currency is in GBP, that's where the issue occurs.

Your EUR account can only match against entries in EUR.

Since these settlements are sent over in SEK/PLN they cannot be matched with anything other than SEK/PLN bank accounts or your home currency GBP bank accounts.

Long term, if possible you should instead use your GBP account for SEK/PLN payments or set up a SEK/PLN bank account (using something like Wise) to receive your SEK/PLN funds into.

Short term, one option we have seen others take in the same situation is to set up a clearing account in SEK or PLN in Xero to overcome this issue.

IMPORTANT - We recommend that you seek advice from your accountant before actioning the steps below.

Create a suspense account within your Chart of Accounts

Within Xero you want to go to the Accounting menu within the top menu and select Advanced Accounting

You will need to select Chart of accounts:

This screenshot shows a section titled "Advanced accounting," divided into two columns: "Advanced features" and "Advanced settings." Under "Advanced features," options include "Find and recode" for fixing incorrect categorisation across multiple transactions and "Manual journals" for working directly with the general ledger, both marked with a solid blue star. Under "Advanced settings," there is "Financial settings" for editing financial settings like tax periods and lock dates, marked with an outline star. Directly below it, "Chart of accounts" is highlighted with a red rectangular outline and marked with a solid blue star; its description states, "Add, edit, archive, delete, import or export your accounts."

Then Add Account:

This screenshot displays a horizontal menu bar from an accounting software interface, showing several buttons: "Add Account," "Add Bank Account," "Print PDF," "Import," and "Export." An orange arrow points directly from a "What's this?" link at the bottom left towards the "Add Account" button, suggesting an action or a prompt for more information about adding an account. Below these buttons, there are categorical tabs for filtering accounts: "All Accounts" (currently selected in bold), "Assets," "Liabilities," "Equity," "Expenses," "Revenue," and "Archive."

Finally create a new current asset account. Make sure you enable payments to this account via the tick box:

This image displays a detailed form for creating or editing an account within an accounting system, specifically showing the setup for a "Suspense (PLN)" account. The "Account Type" is set to "Current Asset." The "Code" field contains "00-2," with a green validation message " '00-2' is available" displayed below it. The "Name" field is "Suspense (PLN)," and the "Description (optional)" field is empty. For "Tax," the default setting is "No VAT." Below this, three checkboxes are visible: "Show on Dashboard Watchlist," "Show in Expense Claims," and "Enable payments to this account," with the last option being checked. On the right side of the screen, a grayed-out diagram illustrates "How account types affect your reports," showing a simplified Profit & Loss statement (Income, Revenue, Sales, Expenses, Net Profit) and a Balance Sheet (Current Assets, Fixed Assets, Liabilities, Equity, Net Assets). At the bottom, "Save" and "Cancel" buttons are present, and a note indicates that account appearances in reports can be modified using "Customised Report Layouts."

Allocate the bank receipt to the Suspense account:

This screenshot displays a bank reconciliation screen in accounting software, likely Xero. The top navigation shows "Reconcile (7)," "Bank statements," and "Account transactions," with "Reconcile" highlighted. A toggle for "Compact view" is in the top right. The main section is split into two halves: the left, for reviewing bank statement lines, shows an entry for "Received money from HSBC BAN... TRANSFER 554424739" on "5 Dec 2022," with a "Received" amount of "39.53." The date "5 Dec 2022" is underlined in red. A "More details" link and "Options" dropdown are also visible. On the right side, for matching with transactions in Xero, the "Create" tab is selected. The "Who" field is populated with "Amazon.pl," and the "What" field shows "00-2 - Suspense (PLN)." An empty "Why" field for description and a "No VAT" tax setting are present. A mouse cursor shaped like a hand hovers over an "OK" button between the two sections, indicating an action to confirm the transaction.

Create a credit note

You will need to create a credit note in the same currency as the invoice to clear the invoice from the Aged Receivables balance.

You can see in the example below that the invoice we are trying to match against is in PLN.

This screenshot displays the "Invoices" section of an accounting software, filtered to show invoices "Awaiting Payment." At the top, there are action buttons like "New Invoice," "New Credit Note," "Send Statements," "Import," and "Export." Below, tabs for invoice status include "All," "Draft," "Awaiting Approval," "Awaiting Payment (2)," and "Repeating," with "Awaiting Payment (2)" currently selected. A search bar allows filtering by "Number, Reference, Contact or Amount," with "amazon.pl" entered in the contact field, and includes date range filters. The main table lists three invoices: The first, INV-0930, dated "1 Dec 2022" (highlighted in red), is from amazon.pl, due in "53 days," and has a "Due" amount of "187.46" (also highlighted in red). The second, INV-0954, from amazon.pl, is dated "16 Dec 2022," due in "25 days," with a due amount of "446.45." The third, INV-0972, from amazon.pl, is dated "1 Jan 2023," due in "11 days," with a due amount of "129.32." A mouse cursor shaped like a hand hovers over the "Due Date" column header, suggesting it might be an interactive element for sorting.

Create credit note with the same date, same currency and same amount as the invoice you are matching against.

(You may want to include a narrative about moving the balance to a suspense account for an audit trail)

The credit note will need to be allocated to the Suspense account to match against the receipt that was earlier allocated there.

This screenshot displays the "New Credit Note" creation screen within an accounting application, providing fields to generate a credit note. The credit note is addressed "To" "Amazon.pl," dated "1 Dec 2022," assigned "Credit Note #" "CN-0585," and has an optional "Reference" of "INV-0930." The branding is set to "Invoices." Currency information shows "PLN Polish Zloty" and an exchange rate of "1 GBP = 5.48413 PLN (01 Dec 2022)." The "Amounts are" setting is "Tax Inclusive." The main table lists one item with "Description" "INV-0930 - Movement to clearing invoice," "Qty" 1.00, "Unit Price" 187.46, "Account" "00-2 - Suspense (PLN)," and "Tax Rate" "No VAT," resulting in an "Amount PLN" of 187.46. The financial summary at the bottom shows a "Subtotal" of 187.46, "VAT" of 0.00, and a "TOTAL" of 187.46 PLN. A mouse cursor shaped like a hand hovers over the green "Approve" button, situated next to a "Cancel" button, with a "Save" dropdown in the bottom left corner.

Match the credit note against the invoice

Once the credit note has been approved you can allocate the balance against the original invoice:

This image displays the "Allocate Credit Balance" screen for Sales Invoice CN-0985. A prominent green banner at the top confirms "Credit Note Approved." The main interactive section is titled "Allocate balance on Credit Note CN-0985," presenting a table of invoices. The table lists three invoices: INV-0930, dated "1 Dec 2022," showing "Invoiced" and "Amount Due" as "187.46"; INV-0954, dated "16 Dec 2022," with "446.45" for both "Invoiced" and "Amount Due"; and INV-0972, dated "1 Jan 2023," with "129.32" for both "Invoiced" and "Amount Due." In the "Amount to Credit" column, "187.46" is entered for INV-0930, while the other fields are empty. Below the table, the "Outstanding Credit Balance" is "187.46," the "Total Amount to Credit" is "187.46," and the "Remaining Credit" is "0.00." A mouse cursor shaped like a hand hovers over the green "Allocate credit" button, located next to a "Cancel" button.

Create journal to clear the suspense account

IMPORTANT - Manual journals are usually recommended for accountants/bookkeepers and those that are experienced at managing the general ledger. You may not have the option to post a manual journal within your user settings.

Once the credit note and payment have been allocated to the suspense account there will be a small difference - this will be a foreign exchange gain/loss that is to be realised.

In this example there is a 29p difference sat on the balance sheet

This is a screenshot of a financial report, specifically a Balance Sheet, as of "6 December 2022." The report is divided into sections, starting with "Fixed Assets." Under "Tangible Assets," it lists "Buildings" (5,064.48), "Computer Equipment" (10,610.65), "Office Equipment" (15,601.02), and "Plant and Machinery" (605.95), along with their respective accumulated depreciations shown as negative values. The "Total Tangible Assets" and "Total Fixed Assets" both amount to "24,461.10." Following this, the "Current Assets" section details "Cash at bank and in hand," including balances for "Lloyds" (16,925.09), "Revolut Current" (32.65), "Wise EURO" (2,693.88), "Wise GBP" (10.00), and "Wise USD" (23.47), totaling "19,684.99." Further down are "Prepayments and accrued income," which shows "Prepayments" and "Total Prepayments and accrued income" both as "38,750.00." Under "Accounts Receivable," items include "Amazon Reserved Balances" (339,848.29), "Stock" (7,671,962.72), and "Suspense (PLN)" (0.29). The "Total Current Assets" is partially visible at "8,180,529.71." A mouse cursor shaped like a hand hovers near the bottom right corner of the image, close to the total.

To clear that from the balance sheet you need to create a manual journal.

You can see below that the accounting entry is

Debit

Credit

Currency Gain/Loss

(Profit & Loss)

£0.29

Suspense Account

(Balance Sheet)

£0.29

(If the balance was a negative amount within Current Assets the balance would be a liability and the journal would be the other way around)

This screenshot displays the "New Manual Journal" creation screen within an accounting software. At the top, a prominent orange banner warns, "We recommend that only your accountant or bookkeeper create journals, unless you have experience managing your general ledger." The interface shows the "Draft" tab selected. Key entry fields include "Narration," which contains "INV-0930 - Movement to clearing invoice," and "Date," set to "8 Dec 2022." There's also an "Auto Reversing Date" field (optional). Two checkboxes are ticked: "Default narration to journal line description" and "Show journal on cash basis reports." Below these, a table outlines the journal entries. There are two lines, both with the "Description" "INV-0930 - Movement to clearing invoice." The first line debits "2900 - Realised Currency Gains" for "0.29 GBP" with "No VAT." The second line credits "00-2 - Suspense (PLN)" for "0.29 GBP" also with "No VAT." The subtotal and total for both Debit GBP and Credit GBP columns are "0.29." A mouse cursor shaped like a hand hovers near the "Narration" field. At the bottom, buttons for "Save as draft," "Post," and "Cancel" are visible.

Check the Suspense account balances off to nil

Here you can see that the suspense account has balanced off to nil. You can see the credit note that was posted (dated the original invoice date), the receipt received and the currency gain/loss.

This image displays a clean, minimalist table illustrating a financial transaction's impact on different account types. The table has three columns: the first for the account name, the second labeled "Debit," and the third labeled "Credit." There are two rows of data. The first row describes "Currency Gain/Loss," with "(Profit & Loss)" in italics below it, and shows a value of "£0.29" in the "Debit" column. The second row is for "Suspense Account," with "(Balance Sheet)" in italics below it, and displays "£0.29" in the "Credit" column. This visual representation demonstrates a balanced journal entry where a currency gain is debited and a suspense account is credited for the same amount.

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