Foreign Transaction Fee + Foreign Transactions

I am struggling with this issue. I have to pay my supplier an amount in a different currency however when transferring money from an Australian Bank they charge me a fee. For the purpose of getting this right i will give an example:

Total Amount Payable to Supplier: 2000 Euros
Part Payment to supplier: 1000 AUD
BALANCE: 281.72 Euros
Transaction fee: $22.00

When i try and do this via spend money where i transfer 1000 AUD and enter the transaction fee as an expense in bank charge it increases the total amount to 1022AUD,

When i enter a 1022 AUD and add bank charge of -22.00 as a bank charge expense it shows as a negative in my expenses.

Can someone please advice what the correct way is to enter this?

When you pay to supplier, simply split the payment where $22 AUD will be allocated to bank fees and $978 AUD to supplier. The total $1,000 will be deducted from AUD bank account.

You really paid $978 AUD to supplier, not $1,000 AUD so that’s the logic behind it.

I get charged a transfer fee of $22.00 after transferring the 1000 AUD.

So for example:

Bank Balance before transfer = 2000AUD
Bank Balance after transfer = 1000AUD
Bank Balance after $22.00 transfer fee = $978.00

So actually the transfer fee is charged after the full transaction has been completed.

On your bank statement, do you see $1,000 and $22 as separate payments or is it combined to $1,022?

Hi @lubos separate payments.

@shruti, I would just enter the $22 as a separate bank fee expense. It really has nothing to do with your supplier’s account. Your supplier would be happy with payment from a bank local to them in their own currency, for which there would be no foreign transaction charge. Financially, this is no different than a monthly checking account maintenance fee. It is a cost of doing business, not a payment to your supplier.

@lubos @Tut shouldn’t this be linked to the Purchase Invoice payment/ bank transfer though? To show that the transaction fee was for that invoice in particular. The suggestion is that enter it as a separate expense. How would I link it to that particar purchase invoice payment or bank transfer?

From accounting point of view, the bank transfer charge has nothing to do with supplier (honest :blush:) . Why do you feel you need to “link” the charge with purchase invoice payment?

Even if Manager would be aware of the link between those two, there is no report that could take advantage of this information.

You can put that information in the Notes field that the charge is related to previous payment of $1,000 or something like that but I just think it’s not relevant.

:smile: sorry… Just learning. Thanks @lubos

@lubos is 100 percent correct. The important thing from an accounting and audit point of view is that you have documentation of the charge. The bank charged the fee and you paid it, and the bank statement will substantiate your payment. The notes @lubos mentioned will record what it was for (a legitimate expense). From an accounting perspective, nothing else matters.

Thanks @Tut