What's the best way to handle PayPal?

Dr. David Kirkby (Kirkby Microwave Ltd) drkirkby at kirkbymicrowave.co.uk
Sat Dec 3 13:27:37 EST 2016


On 3 December 2016 at 17:12, Buddha Buck <blaisepascal at gmail.com> wrote:

> As something to consider, while GnuCash does have the ability to import bank
> transactions, I, personally, wouldn't do it. The main philosophical reason
> is that the bank statement represents the bank's view of what is going on in
> the account, which doesn't necessarily match your view. Transaction dates
> can be different, errors can crop up, etc. By importing bank transactions,
> you are substituting your bank's view for your own.

I take your point.

> To further my understanding, your business primarily works in GBP, your
> prices are in GBP, and your accounts are in GBP.

Yes.

>> Your purchased and sales in
> the US are done through PayPal, which handles the currency conversion --
> when you buy something that costs US$100, PayPal deducts £78 from your
> account, and when you sell something to a US customer for $100, PayPal adds
> £78 to your account, and you never actually own any USD?

No such luck!! PayPal make money both ways on currency transfer fees.

Just for the record, to put some real numbers on this, xe.com, which
gives the average of the buy and sell rates, shows today that $100
(USD) = £78.53 (GBP)

I just checked my PayPal account to see what it would cost to send
someone $100 (USD). It would cost £81.27 (GBP), so a 3.5% difference
from xe.com.

I don't know exactly what I would get it I sold something for $100,
but I suspect that PayPal would charge a similar 3.5% currency
conversion fees of £2.74, so I'd probably get about £78.53 - £2.74 =
£75.79 *before* PayPal even take their seller fees of around 4.5%.

> If this is the case, don't worry about currency differences as far as your
> books are concerned; PayPal insulates you from all that.

Yes, they insulate me, but also make a fair bit out of the currency
conversion. Probably 3.5% each way, then another 4.5% seller fees.

If I sell something in USD, and keep the USD my PayPal accout, I only
pay the seller fees (4.5%). I can then buy something in USD for no
further fees. But if I sell in USD, convert back to GBP, then the GBP
back to USD to buy things, I'll probably lose about 11.5%.

So there are some advantages in selling more in USD, but obviously
from an accounting perspective, it makes like more tricky. But saving
about 7% is not something to ignore.

I note that when my accountant recently submitted the accounts to
Companies House, there was a paragraph which said:

============
Transactions in foreign currencies are recorded at the rate ruling at
the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are
translated at the rate of exchange ruling at the balance sheet date.
All differences are taken to the profit and loss account.
============

I need to discuss this with my accountant, but that might mean it is
even more complicated if I kept USD in a US PayPal account. There
would be no record of the value in GBP of those USD at the time of the
transaction.


Dave



More information about the gnucash-user mailing list