Multi-currency, multi-company accounting for a growing business

Three questions before any setup

1. How many legal entities are there? Each company registered separately, with its own tax registration and statutory accounts, needs its own set of books.
2. Which currency does each entity report in? That is its base currency, usually the currency of the country where it is registered.
3. Which currencies does each entity trade in? Invoices, supplier bills and bank accounts in other currencies all need exchange rates.

Write the answers down with your accountant. Branches, departments and warehouses come after this, inside each entity. Our multi-branch checklist covers that layer.

Company or branch?

A common early mistake is setting up a second legal entity as a branch of the first, because it is quicker. It works until the second entity has to file its own tax return or produce its own accounts, and its transactions are mixed into someone else's ledger.

The rule of thumb: if it has its own registration, its own tax number or its own bank accounts in its own name, it is a company. If it is a location of the same legal entity, it is a branch. Branches share one ledger, one tax registration and one base currency, and can be compared and combined freely. Companies keep separate books.

Base currency and transaction currency

Each company's ledger is kept in its base currency. When a company invoices in another currency, two amounts matter: the amount in the invoice currency, which is what the customer owes, and the amount in the base currency, which is what goes into the profit and loss and the tax return. The bridge between them is the exchange rate, and it should be fixed on the invoice when it is raised.

Agree a rate policy with your accountant: the source of rates, the date used (usually the transaction date), and who may override a rate. Then apply it every time. Inconsistent rates are one of the most common reasons a foreign customer's balance never quite reconciles.

Exchange differences: realised and unrealised

Rates move between the invoice and the payment. If you invoice a customer USD 10,000 when the rate gives 36,700 in your base currency, and the customer pays when the same dollars are worth 36,500, the 200 difference is a realised exchange loss. It is not a discount and not a bank charge, and it belongs in its own account.

At month or year end, open foreign-currency balances may also need restating at the closing rate, producing unrealised gains or losses. Whether and how you do this depends on your accounting framework and your auditor. Decide the policy before the first year end, not during it.

Inter-company transactions

Once there are two companies, they will trade with each other: one sells goods to the other, one pays an expense on the other's behalf, or the parent lends money to the subsidiary. Each transaction must appear in both sets of books, as a receivable in one and a payable in the other. Practical rules:

• use a dedicated inter-company account in each company for each counterparty, not general receivables;
• give both sides the same reference and date;
• agree in which currency the balance is held, and the rate used on each side;
• reconcile the balances monthly, before closing either company;
• settle balances regularly rather than letting them grow for years.

Cross-border inter-company pricing can have tax consequences of its own. Ask your adviser before setting prices or charging fees between your companies.

Group reporting

Combining branches inside one company is a filter. Combining separate companies into group accounts is more: inter-company sales, balances and profits are eliminated, and companies with different base currencies are translated into one. For most growing businesses, the accountant prepares group accounts from each company's reports, using the reconciled inter-company balances. Clean, matching inter-company accounts are what make that job quick.

People and permissions

Finance staff often work across companies; branch staff rarely should. Give each user access to the companies and branches they need, and check that approvals in one company cannot be given by someone who only works in another.

How this works in NAQIX

In NAQIX each legal entity is a separate company with its own base currency, tax setup, numbering and books, and users with access to several companies switch between them. Branches sit inside a company and share its ledger, with branch-scoped workspaces and HQ views that combine them.

• Sales invoices can be raised in other currencies. The exchange rate is saved on the invoice, and the ledger records the base-currency amount alongside the foreign amount.
• Exchange rates can be synced from a public rate feed or entered by hand on the Exchange Rates page.
• Supplier bills and expenses are recorded in the company's base currency.
• Manual journals can carry a currency and an exchange rate, which is how your accountant records exchange differences, revaluations and inter-company adjustments.

NAQIX does not post exchange differences, revaluations or inter-company eliminations automatically, and group accounts across companies are prepared from each company's reports. The Accounting & reports, Branches & insights and Sales & billing pages list the features, and market pages such as Europe and the United States describe the local setup in each country.