How to record a foreign exchange loss?

When a foreign currency invoice is collected at an exchange rate lower than that of its issuance, the negative difference must be recorded as a debit to the Foreign Exchange Losses account to balance the Accounts Receivable.

How to record a foreign exchange gain?

If the exchange rate has evolved favorably between billing and collection, the surplus received must be recorded as a credit to the Foreign Exchange Gains account.

Why is international invoice reconciliation so complex?

The complexity comes from international bank fees (SWIFT) and the spread (hidden margin) taken by the bank during conversion. The accountant receives a net sum that mixes natural exchange risk and bank fees, making reconciliation time-consuming.

Multi-currency accounting: Expert guide to CHF / EUR reconciliation

The headache of cross-border reconciliation

For an SME based in Geneva or an exporting company located in the Eurozone, billing in a foreign currency inevitably generates accounting friction. When an invoice of 10,000 CHF results in a net collection on your Euro account, your accountant must justify every cent of the difference. But what part is due to the natural market variation, and what part is attributable to your bank's hidden "spread" and SWIFT fees? Without total transparency from the financial provider, reconciliation becomes a costly waste of time.

The principle: The mechanics of exchange differences

In accounting, the principle is strict: an invoice issued at time T in a foreign currency (for example in CHF for a European company) is recorded at the exchange rate prevailing on the billing date. When the client pays their due thirty days later, the exchange rate has inevitably fluctuated.

This temporal fluctuation creates a mechanical difference that accountants must clear during bank reconciliation: a foreign exchange gain or a foreign exchange loss.

Chart of Accounts: International Codes Comparison

Before analyzing the entries, it is crucial to master the nomenclature. Whether you use a Swiss SME plan (like GIT WinEUR or Bexio), the French PCG, the German SKR, or the Italian Piano dei Conti, here are the core accounts to use for commercial operations:

Nature of Operation	Switzerland (SME Plan)	France (PCG)	Germany (SKR 03)	Italy (PdC)
Main Bank Account	1020	512	1200	Conto 180 (Banca)
Accounts Receivable	1100	411	1400	Crediti v/clienti
Bank Fees	6940 (or 6840)	627	4970	Spese bancarie
Exchange Losses	6940	656	2150	Perdite su cambi
Exchange Gains	6990	756	2660	Utili su cambi

Accounting entries in practice

Let's take the example of a company that invoices a client for an amount of 10,000 CHF. On the day of issuance, the exchange rate gives a value of 10,500 EUR in your accounting books.

Scenario A: Collection with an Exchange Loss

A month later, the client pays 10,000 CHF, but the exchange rate has evolved unfavorably (the Swiss franc has dropped). The company only receives 10,400 EUR on its bank account.

Debit: Bank Account for the actual incoming flow (10,400 EUR)
Debit: Foreign Exchange Losses for the negative difference (100 EUR)
Credit: Accounts Receivable to fully clear the receivable (10,500 EUR)

Scenario B: Collection with an Exchange Gain

Conversely, if the exchange rate has evolved favorably (the Swiss franc appreciated), the company receives 10,600 EUR.

Debit: Bank Account for 10,600 EUR
Credit: Accounts Receivable for 10,500 EUR
Credit: Foreign Exchange Gains for the surplus (100 EUR)

The major problem: Hidden bank fees

Accounting theory often collapses when faced with banking reality. When an international transfer passes through the classic SWIFT system, two opaque deductions distort your entries:

Correspondent fees (SWIFT): Fixed fees taken by intermediary banks.
The "Spread" (Exchange margin): This is the real scourge for CFOs. The bank applies its own marked-up rate, hiding a commission often between 1 percent and 2 percent.

The impact on accounting:
The SME's bank statement displays a reduced net sum, without any details. The accountant is unable to mathematically separate what is due to pure market fluctuation (Exchange Gains/Losses) from what is due to pure banking service fees. Lacking data, the accountant often records the entire deficit as an "exchange loss," which distorts the financial analysis.

The "Smart" method: How ibani allows perfect reconciliation

Using an expert fintech platform like ibani fully resolves this reconciliation problem, while generating immediate savings.

1. A dedicated local collection IBAN (End of SWIFT fees)

If you are a European company billing Swiss clients, ibani grants you a Swiss IBAN (CH) in your company's name. The client pays by local transfer (free for them). The sent amount is exactly the gross amount received.

2. Dissociated and transparent pricing

Upon receipt of the funds, ibani performs the conversion. Unlike a traditional bank, the operation is transparent: the real interbank market rate is strictly applied, and the service commission (from 0.40 percent) is isolated on your statements.

3. Finally, an exact accounting entry

Thanks to the detailed transaction reports generated by ibani, the fiduciary has the necessary proof to correctly allocate the entry:

Debit: Bank (Final net flow received)
Debit: Banking Fees for the clearly identified ibani commission.
Debit or Credit: Exchange Losses or Gains for the true exchange difference linked to market fluctuation.
Credit: Accounts Receivable (For the initial invoice).

Automation and ERP integration

Manual reconciliation is time-consuming. The ibani platform allows CFOs to export precise statements (CSV, PDF) that easily integrate into the main accounting software and ERPs on the market (Winbiz, Odoo, Bexio, Sage), drastically accelerating month-end closing processes.