General Question

gorillapaws's avatar

Bookkeepers and accountants: How to handle international money transfers?

Asked by gorillapaws (28259points) January 15th, 2022

I’m helping a friend configure his online accounting system. He imports items from Italy from multiple Italian vendors. He makes payments to them through an international money transfer website.

I created a “credit card” account for the international money transfer account, so I could record payments from the intermediary to the individual vendors and also the payments from his bank to the intermediary. This feels like a hack though and I wasn’t sure if there was a better approach. Do you have any suggestions for how to structure and document these payments?

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17 Answers

Tropical_Willie's avatar

Not be harsh; your friend needs an international lawyer and a CPA, thanks for helping but he could be trouble with the IRS already.

elbanditoroso's avatar

Have you (or he) looked into banking with a US Bank that has branches in Italy?

According to this article (above) Citibank, Bank of America, and Chase all have branches in Italy.

I have zero idea what the laws are (if you make a deposit in Michigan can he withdraw in Milan?) but that might be one approach.

JLeslie's avatar

I do transfers on to Italy. The customer service has been great the rare instances that I needed to call them. The website is easy. The exchange rate is decent to most countries. You can negotiate a rate with them if you are doing a lot of transactions or large transactions.

I can tell you how much it would be for me to send money to Italy if you want to compare on a certain day at a certain time as an experiment.

Edit: I don’t understand the problem with how to record it. You just record it as a payment in the amount it cost. He’s paying from an American bank account, is that right? He should have a business bank account and a business credit card if he has an LLC or corporation. No comí going funds with personal accounts. Does that answer what you want to know? I’m not sure.

I’m not an accountant, but I’ve owned businesses and am a business manager for a company that pays people all over the world.

It’s a good idea to get advice from an accountant on basic set up for the business.

gorillapaws's avatar

@JLeslie That’s the service he’s using. I’m just trying to figure out how to create an account in his software that both captures the payments from his bank to XE, and also from XE to his vendors. It seems like the only choices are either a credit card account or a bank, neither of which are a perfect fit.

JLeslie's avatar

Isn’t XE grabbing the money directly out of a checking account?

JLeslie's avatar

Are you using QuickBooks?

JLeslie's avatar

I just record it as a “check” because the money comes out of my company’s checking account. XE is irrelevant to the bookkeeping, except to say that I do record the confirmation number from XE on the bookkeeping entry.

gorillapaws's avatar

@JLeslie Not QB, he’s shifting out of QB to Zoho Books.

”XE is irrelevant to the bookkeeping”

But the transaction on his bank statements will list the payments to XE and not the final vendor. I thought they had to match?

JLeslie's avatar

@gorillapaws They don’t have to match. The amount will be correct and reference the XE confirmation number. Your XE documentation shows where the money went.

You can save the confirmation document from XE for your records if you want to. I never bother, but it’s in my emails if I ever needed it I guess. Probably, a good idea to save it to a file.

gorillapaws's avatar

@JLeslie “They don’t have to match.”

I didn’t realize that; that’s awesome. You just saved my buddy a lot of time and hassle! Thank you so much.

JLeslie's avatar

@gorillapaws Sure. He might want to run how he’s doing it past his accountant for an actual tax professional opinion, but if you just think about it logically, he probably receives payments that don’t say the actual vendor name on his bank statement, and he would just record that as a payment like any other.

I don’t know the system he’s using, I only know QuickBooks, so I can’t help with that part of it. Maybe there is a place he can set up “XE” or “money transfer” under checking? Not really necessary though. There must be a place to write a memo note. I write the XE confirmation number where the check number would usually go in my QuickBooks.

gorillapaws's avatar

@JLeslie …“if you just think about it logically, he probably receives payments that don’t say the actual vendor name on his bank statement, and he would just record that as a payment like any other.”

Very true. I guess my concern is that he would be omitting transactions. If it’s not necessary though, then it definitely simplifies things. I’ll be sure to have him include the confirmation number in the memo. That’s a good way to approach it.

JLeslie's avatar

@gorillapaws Omitting what transactions?

He will either record it as a “check” right off the bat and fill in the vendor name and the amount. Or, he will record it as an “expense” and then pay the expense with a check or some subset category from his checking account. (Assuming the money is directly pulled from his checking account by XE).

I assume he reconciles his bank account.

gorillapaws's avatar

@JLeslie Well there’s a bank draft from his checking to XE and then a transfer from XE to the vendor, so those 2 transactions are being condensed into 1. That’s what I was referring to as “omitting.”

His books are kind of a mess. He has a CPA that’s been getting him through, but it’s been mostly opaque to him and he hasn’t had much in the way of inventory management. His business has grown to the point where he can’t just “wing it” anymore. Ideally he’d hire a consultant to set up all of his integrations and such, but he’s cheap and I’m a good friend so we’re figuring it out together. We’ll be sure to run things by the CPA once we get it all set up, but I don’t think he want to pay one to migrate and configure his accounting software pipeline. It’s a lot cheaper to just have him look over the finished system and make any necessary changes.

I’ve been doing bookkeeping for about a decade now (though never formally trained), but my experience has been with relatively straightforward transactions. Inventory and international transactions are new for me. I’m truly grateful for the advice.

JLeslie's avatar

Ok, I see now what you meant by omitting.

I stick to what I said originally, you don’t need to show the XE step, you only need to note the money was sent to the vendor via XE.

If he wants to pay someone I can take him on as a client. lol. That’s the work I do as a subcontractor. Although, I am not familiar with the system he’s using, I’d have to get familiar with it. I wonder why he left QuickBooks, I wonder if it was QuickBooks online or just on his computer.

If you have any other questions feel free to message me.

gorillapaws's avatar

@JLeslie Will do. I think he was looking for something with more inventory integration. He was on QB online and I was able to export and configure the new setup. Things are mostly going pretty well. I’m definitely going to pass along your suggestions. Thank you again.

Hedgiega's avatar

Crypto. Also ever heard of the Dark Crystal?

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