Record a Foreign Currency Transaction in MoneyWorks: Should You Open a Foreign Currency Bank Account

Sarah runs a small design agency in Singapore, mainly serving local clients in Singapore dollars (SGD).

One day, a client asked her to invoice their overseas subsidiary directly in US dollars (USD). It was her first time dealing with a foreign currency. The project value was about S$13,500.74, which she rounded to US$10,000 at an exchange rate of 0.7407. Everything looked straightforward, so she invoiced the overseas client for US$10,000.

A few months later, the client remitted US$10,000 to settle the outstanding amount. Since Sarah didn’t have a foreign currency bank account, the funds were credited directly to her SGD bank. To her surprise, she received only S$12,950 — at an exchange rate of 0.7722 — instead of the S$13,500.74 she expected. Within a few months, the exchange movement had cost her S$550.

Sound familiar?

If your business occasionally deals with overseas clients or suppliers, you’ve probably asked yourself:  

"Should I open a foreign currency bank account?"

Let’s look at how such transactions are recorded in MoneyWorks and what factors to consider.

Recording a Foreign Currency Transaction in MoneyWorks

Sales Invoice

Assume the invoice was issued in January and payment was received in April.

When Sarah issued the sales invoice for US$10,000 at an exchange rate of 0.7407 (USD 1 = SGD 1.35), the journal entry was:

Debit USD Accounts Receivable 10,000

Debit USD Accounts Receivable 3,500.74

Credit Sales 10,000

Credit Sales 3,500.74

Note: The “~~Del” (Delta) account is a foreign currency account that captures the exchange translation difference between USD and SGD.

Since Sarah isn’t regularly involved in foreign currency transactions, she keeps the same exchange rate unchanged.

Receive Payment

Because Sarah doesn’t have a USD bank account, she has two options when recording the receipt:

1. Deposit the payment directly into her SGD bank account; or  

2. Use a USD Clearing Bank as a transit account, then transfer the funds into her SGD account.

Even if she selects her SGD bank account directly, MoneyWorks will still prompt her to use a USD Clearing Bank behind the scenes. Let’s illustrate this using the Clearing Bank method.

What Is a Clearing Bank Account?

A Clearing Bank account is a dummy account used to transfer funds from a foreign currency (USD) to your home currency (SGD) bank. It’s typically created when you first set up a foreign currency in MoneyWorks.  

Account type: Bank 

Description: USD Clearing Bank

Currency: Foreign currency (e.g., USD)

Receipt Using the USD Clearing Bank

Enter the receipt, select the customer (USD), and choose the USD Clearing Bank under Deposit To. Then, match the paid invoice and save.

The journal entry:

Debit USD Clearing Bank 10,000

Debit USD Clearing Bank~~Del 3,500.74

Credit USD Accounts Receivable 10,000

Credit USD Accounts Receivable~~DEl 3,500.74

At this stage, no gain or loss occurs because the exchange rate hasn’t changed.

Transfer Funds

Next, go to Command → Fund Transfer.

- Source Account: USD Clearing Bank  

- Destination Account: SGD Bank  

- Transfer Amount: US$10,000  

- Received Amount: S$12,950  

The journal entry for the transfer:

Debit SGD Bank 12,950

Debit Exchange Gain/Loss Realised 550.74

Credit USD Clearing Bank 10,000

Credit USD Clearing Bank~~Del 3,500.74

Sarah recorded a realised exchange loss of S$550.74.

Should You Open a Foreign Currency Bank Account?

That S$550 loss may seem high, but should every small business open a foreign currency account? Here are some factors to consider.

1. Bank Fees and Maintenance Costs

Foreign currency accounts often come with monthly fees, minimum balance requirements, and transaction charges. If your business only occasionally invoices in USD, these costs may outweigh the benefits.

2. Low Transaction Volume

If most of your income and expenses are in SGD and you rarely receive or pay in other currencies, it’s simpler to let your bank handle the conversion automatically when payments occur.

3. Exchange Rate Considerations

Pro: Holding funds in USD allows you to convert when rates are more favourable.  

Con: If you don’t actively monitor FX movements, you risk losses from rate volatility. Many owners prefer to “convert immediately and forget about it.”

4. Operational Complexity

Managing multiple currency accounts increases bookkeeping complexity. You’ll need to reconcile foreign balances, track exchange gains or losses, and maintain additional records. Small firms often prefer to keep things straightforward.

5. Cash Flow Predictability

Using your home currency for all transactions provides clarity — you always know exactly how much you have in SGD. With foreign balances, your local-currency value fluctuates daily until conversion.

Conclusion

For most small businesses that rarely deal in foreign currencies, simplicity wins.  

Understanding how exchange rate changes affect your books can prevent unwelcome surprises—and protect your hard-earned profits.

Consult your accountant if you have doubts about foreign currency transactions or maintaining a foreign currency account.