Optimal PayPal / Multiple Currency Usage

CoryTrevorCoryTrevor Member Posts: 4

My PayPal / Wave setup is quite clunky. While it's been manageable so far, I'm afraid it's not going to scale well and was wondering if there's a better way to do it.

I'm a Canadian business so CAD is the default currency, but I invoice U.S. customers in USD and they all pay via PayPal.

From PayPal, I withdraw CAD to my bank account, and those transactions are then imported to Wave via bank connection. I do NOT have PayPal itself connected/integrated with Wave.

In order to keep track of the converted CAD amount, I've been doing a paypal bank withdrawal every single time I get a payment. That way I can go record a payment in Wave and enter an exchange rate to reflect the correct USD/CAD conversion, and it's easy to see the amount.

This would obviously be a problem as I become busier, as I can't do a PayPal withdrawal after every single payment. I need to be able to pull out a lump sum from PayPal periodically.

But in that case, how can I easily record the proper exchange rate on each USD invoice? Is there an easier way? It's easy to see the converted amount when I do a withdraw for each payment, but I can't do that forever.

I am currently looking into getting a USD bank account with my Canadian bank to receive payments in USD, for a variety of reasons, such as saving on exchange fees, and hopefully making my accounting easier. I'm not sure if it will work but I would like to try it. Then I would work with all those USD invoices in USD and involve no conversions. I would still have to delete the imported duplicate amount from the USD bank auto-import, but at least I could do lump-sum USD-CAD conversions at a later time and not have to record any exchange rates for every invoice/payment.

Hope this makes sense, interested in hearing how others have been using Wave in a similar scenario. Thanks!

Comments

  • AlexiaAlexia Administrator Posts: 3,315 admin

    Hi, @CoryTrevor,

    Your setup isn't that wonky, I promise. Wave and PayPal don't always play nice with each other. Not having PayPal connected to Wave will probably make this simpler. I'll give you my recommendations for both before and after you get a USD account. In both cases, we'll have to create a PayPal account (in USD) on your Chart of Accounts. Create it under the "Cash & Bank" account type.

    What a PayPal transaction should look like in your accounting

    Before I dig in I just wanted to break down what a PayPal transaction should look like in your accounting. It has a few different parts.

    • The sale: An income transaction for the full amount the client paid, using "PayPal" as the payment account and categorized to an income account (probably "Sales")
    • The merchant's fee: An expense transaction to the "PayPal" account categorized to a new expense account you'll call "PayPal Fee".
    • A transfer from PayPal to your bank account.

    The easiest way to get your PayPal transactions to this account is to download your PayPal transaction history in CSV format, and modify it so that it can be uploaded to Wave as if it was a bank statement. Here's how to do this.

    Using only a CAD account

    Wave's exchange rate always matches the mid-market exchange rate from XE.com on the day of the transaction. This won't take into account any fee charged from your bank, however, so a simple transfer from your PayPal (USD) account to a CAD bank account might not match what appears in your bank account. You can get around that. You'll need to create a "Money in Transit" account in CAD. Here's what you'll do when you transfer an amount of money from your PayPal account to your bank.

    • Create a transfer from "PayPal" to "Money in Transit" for the amount transferred in USD. Wave will automatically convert the amount to CAD in Money in Transit.
    • Create a transaction that adjusts the amount in "Money in Transit" so that it matches the amount that was actually deposited in your bank account. Categorize it to "Gain/Loss on foreign exchange" depending on the case.
    • Transfer what's in "Money in Transit" to your bank account

    Using a USD account

    Once you have a USD account, it'll essentially act the same as your "Money in Transit" account, but you'll be able to let money linger there until you decide to convert it into CAD. You might still require an adjustment every now and then, so it's a good idea to keep your Money in Transit account around for that purpose so that you'll be able to reconcile both your CAD and USD accounts without issues.

    I know this is a lot to put into a single post, so let me know if you have any questions.

    edited September 18, 2018
  • bendekkobendekko Member Posts: 3

    I'm a Canadian and also have a majority of USD PayPal incoming payments. I have both a CAD and USD bank account BUT Paypal will NOT transfer to a US Dollar account in a Canadian institution.

    Instead, they will convert your USD to CAD within Paypal (I'm assuming so they can take their exorbitant fees) and transfer the greatly reduced CAD amount to your Canadian Dollar account.

    Maybe there are legal reasons but seems scammy to me.

    One work around that I've found is that since my other small business collects mostly CAD but has a lot of USD expenses. I just trade the Currencies between the two companies and pay my US expenses via Paypal when possible.

    If Stripe is an option for you, then I highly recommend it. I have a TD Bank CAD and USD account. Stripe will bundle up the transactions and deposit CAD funds into your CAD account and your USD funds into your USD account automatically.

    Downside is the Stripe integration with Wave is lacking. Yes, Zapier is an option, but I couldn't seem to find a way to differentiate the CAD and USD transactions so that's kind of useless for me.

    What I do is categorize the "bundled" transfer that come from Stripe by logging into the Stripe dashboard and seeing which individual transactions are included in that payment "bundle". I only have a few different categories to track so it's not too painful.

    Hope this helps and if someone has a better way, I'd love to hear it.

  • CoryTrevorCoryTrevor Member Posts: 4

    Thanks for sharing, and nice to hear from someone else in Canada using Wave in a similar situation.

    In hopes of helping others, I'll share an update of what I ended up doing. I'm actually going through a new process now as I've incorporated the business and need to use official business bank accounts, previously being sole proprietor I was using personal accounts which was of course are cheaper and more options are available. I don't advocate for this since the banks may catch on and have a problem with it, but it's not illegal. Of course once incorporating it is legally required to have business accounts in the business name.

    During the sole proprietor phase I ended up using the RBC U.S. Dollar Direct Checking personal account and also their U.S. Dollar VISA for expenses. This actually worked great and I'm sorry to hear about your PayPal troubles. I signed up for this RBC account by accessing their normal Canadian website, but the account was with RBC Bank Georgia, and indeed was completely USD. I could transfer my USD PayPal balance right into that account and it remained as USD. RBC even let you instantly transfer USD to CAD if you have a Canadian account with them. Their exchange rate was better than PayPal, but still not great. See more below on that.

    So now what I was doing was receiving invoice payments in USD via PayPal, adjusting the invoices to reflect the PayPal fee (I know this can be done with split transactions, but in this case I'd just subtract the fee from the invoice as a negative line item) and then record as paid in Wave for the exact USD amount. Then I'd have an accurate reflection of what was in PayPal and would do periodic lump sum USD-CAD exchanges using xe.com where I found a much better exchange rate than PayPal. It's a little slow compared to the instant RBC transfer, but the savings were worth it.

    Not having PayPal connected to Wave was indeed the way to go for me, it complicates things rather than making them easier.

    Nice recommendation on Stripe, I looked into that as well, despite their fees being about the same as PayPal, I just despise PayPal so much that I would have done it. The problem is as you said, Wave has no integration with Stripe, so offering that to U.S. customers as an option really only would have complicated my workflow and taken additional time, so there was no point.

    All that worked fairly well under Sole Proprietorship but as I said, after incorporating it's more complicated since I need to use official "business" accounts which usually come with much less flexibility and more fees. RBC's only "business" USD account has insanely high fees, whereas the personal one was nearly free.

    I've found TD has a decent deal on a USD business account so I'm currently in the process of signing up, and hoping that it will work the same way in that PayPal will deposit USD to it.

    I'm also trying to offer Transferwise as a payment option to my customers, which again offers no integration with Wave, but would save a lot on FX and transfer fees. The problem is that PayPal is just so common and simple for users, it's just easier for most people.

    The fact that Wave doesn't offer simple flexibility with their built-in credit card payment system (or allow integration with something like Stripe which actually works well) is frustrating also. I refuse to bill my Canadian clients in USD or my US clients in CAD simply so they can all pay with a credit card, and then potentially incur FX fees from their bank. If Wave let me accept credit card payments in both currencies, I would have a lot less PayPal payments and a lot less bookkeeping headaches.

    edited January 6, 2019
  • MitchellGillespieMitchellGillespie Administrator Posts: 17 admin

    Hey @CoryTrevor,

    I just wanted to reach out to thank both you and @bendekko for an amazing dialogue on how you're managing the cost of accepting USD payments as a CAD business. We are actively working with our Payments by Wave partner to open functionality to accept cross border payments as a CAD business working with USD clients. As we develop that solution we will strongly consider and plan for how to settle USD & CAD transactions into the appropriate USD and CAD bank accounts.

    This detailed information has been extremely useful for me. Thank you again,

    edited January 17, 2019
  • CoryTrevorCoryTrevor Member Posts: 4

    @MitchellGillespie said:
    We are actively working with our Payments by Wave partner to open functionality to accept cross border payments as a CAD business working with USD clients. As we develop that solution we will strongly consider and plan for how to settle USD & CAD transactions into the appropriate USD and CAD bank accounts.

    Thanks very much, Mitchell! Glad this was a help and I'm excited to know that this functionality is being considered. It will make life much easier for both myself and clients who will be able to take advantage of automatic payments.

  • bendekkobendekko Member Posts: 3

    Hey CoryTrevor, I was on the phone last week with paypal about a different issue and brought up the concern about paypal NOT transferring USD funds to my Canadian account. They claimed it was a Canadian Banking regulation that prohibits that. I'm with TD and I cannot transfer USD funds from paypal.

  • bendekkobendekko Member Posts: 3

    I'm also incorporated and have separate business accounts for both CAD and USD. Dealing with multiple currencies is a real pain and the automatic exchange rate calculation by WAVE makes life challenging. Journal entries to make things balance might be the answer although i'm pretty new to this and working on figuring it out.

  • CoryTrevorCoryTrevor Member Posts: 4

    Thanks for the updates, for anyone else reading I'll outline where I'm currently at and what I've settled on for now.

    • Tried the TD Canada USD account (this must be what you are using, bendekko) and it's the same as the others, a Canadian-based USD account. No good for me as I only withdraw from PayPal so I basically have no way to put USD into it. I did find that RBC Georgia does offer an actual US-based account to Canadian businesses, but for a whopping $150/mth. Out of the question. National Bank seems to offer something similar for about $30/month, but their signup/customer service was such a nightmare I just abandoned them completely.

    Also, on TD's U.S. site when I click small business, a region selector comes up and says (I copied and pasted this) "Canadian residents can bank with TD Bank in the U.S. as Cross-Border customers." - so I tried signing up, and the rep who called acted like I was crazy and said it was impossible, so another dead end.

    • The amount I was saving by converting money at a third party exchange vs PayPal was not enough to warrant this headache and waste of time. I decided it was time to face reality and just use PayPal to convert my USD to CAD. I was going to pay a conversion fee no matter what I used, and PayPal's was fairly close to most of the other options. At this point in time for me it was not worth it to pursue any alternatives.

    • Now I'm just using a CAD bank account and CAD credit card. I'm handling USD payments using the steps suggested above by the kind Wave employee. I'm thankful that I work with a low-volume number of clients, around 20 or so per month, otherwise the accounting would turn into much more of a nightmare than it already is.

    • One thing I am doing is paying my USD-based bills/contractors using my USD PayPal balance. Saves me having to lose FX fees from the CAD credit card. This separate balance in PayPal is the closest thing I have to a USD bank account at this point.

    Hope this helps others out there searching for the same answers.

    edited January 24, 2019
  • TTechTTech Member Posts: 7

    @bendekko said:
    Hey CoryTrevor, I was on the phone last week with paypal about a different issue and brought up the concern about paypal NOT transferring USD funds to my Canadian account. They claimed it was a Canadian Banking regulation that prohibits that. I'm with TD and I cannot transfer USD funds from paypal.

    If you open a TD Web Broker account (originally for Stock markets) you simply bypass those stupidities or don't use paypal, use Squareup and ECWID cart to Bypass the problem altogether without being pinched by Revenu Canada/Quebec for suspicious financial behavior, with this method you can accept Coinpaymentsand juggle some more to annoy you know who lol

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