Key takeaways
What this article covers, in order:
- The bill that cost $120 more than it said
- Realised vs unrealised, in plain English
- A purchase, from start to finish
- A sale, from start to finish
- Don't forget the fees
- Foreign currency bank accounts
When you buy or sell in a foreign currency, the Australian dollar value of the invoice is fixed on the invoice date, but the amount you actually pay or receive depends on the exchange rate on the day the money moves. That difference is where foreign exchange gains and losses (FX for short) come from. It's "realised" once the payment happens and "unrealised" while the invoice is still open at a reporting date. Here's how both work, with numbers that add up.
The bill that cost $120 more than it said
Ella runs a homewares business from a small warehouse in Adelaide. She buys ceramics from a supplier in the US and sells to stockists in Australia and the UK.
On 5 Oct 2026 she receives a bill for US$5,000. On that day, A$1 buys US$0.6500, so the bill is worth A$7,692.31 in her books. She pays it on 2 Nov 2026. By then the Australian dollar has slipped to US$0.6400, so sending US$5,000 costs her A$7,812.50.
Same bill. Same US$5,000. But it cost her A$120.19 more than it was recorded at. That's a realised FX loss.
Realised vs unrealised, in plain English
Realised means the transaction is finished. Money has changed hands. The gain or loss is locked in.
Unrealised means the invoice or bill is still open, but the exchange rate has moved since you recorded it. If you produced a balance sheet today, the A$ value of that open balance would be different from what's in your books. The gain or loss is on paper and can still change.
A purchase, from start to finish
Ella's US bill, including a month-end in between:
| Date | Event | Rate (US$ per A$1) | A$ value of US$5,000 | FX effect |
|---|---|---|---|---|
| 5 Oct 2026 | Bill received and recorded | 0.6500 | $7,692.31 | |
| 31 Oct 2026 | Month-end, bill still unpaid | 0.6450 | $7,751.94 | $59.63 unrealised loss |
| 2 Nov 2026 | Bill paid | 0.6400 | $7,812.50 | $60.56 further loss |
| Total | $120.19 realised loss |
Check: $7,812.50 - $7,692.31 = $120.19, and $59.63 + $60.56 = $120.19.
The Australian dollar weakened, so buying US dollars got more expensive. When you owe money in a foreign currency and the AUD falls, you lose. When the AUD rises, you gain.
Whether you book the unrealised loss at 31 Oct 2026 depends on how you and your accountant handle month-end revaluations. Many small businesses only revalue at year-end. The realised loss at payment is recorded either way.
A sale, from start to finish
On 8 Oct 2026 Ella invoices a UK stockist £2,000. A$1 buys £0.4900, so the invoice is worth A$4,081.63 in her books.
The stockist pays on 6 Nov 2026. By then A$1 buys only £0.4850, so the £2,000 converts to A$4,123.71.
| Date | Event | Rate (£ per A$1) | A$ value of £2,000 |
|---|---|---|---|
| 8 Oct 2026 | Invoice issued | 0.4900 | $4,081.63 |
| 6 Nov 2026 | Payment received | 0.4850 | $4,123.71 |
| Realised FX gain | $42.08 |
When you're owed foreign currency and the AUD weakens, each pound is worth more Australian dollars, so you gain. The pattern is the mirror image of the purchase.
Don't forget the fees
The exchange rate in the examples is a clean "market" rate. In real life your bank or transfer service usually gives you a slightly worse rate and may add a fixed fee.
Say Ella's bank charges a $15 transfer fee on the US payment and the actual A$ debit is $7,827.50. That's $7,812.50 for the currency plus $15 in fees. Record the $15 as a bank fee, not as part of the FX loss, so you can see what currency movements are costing you separately from what your bank is charging.
Likewise, when the UK stockist's payment lands, it might arrive a few dollars short because of an intermediary bank fee. Record the shortfall as a bank fee so the invoice closes.
Foreign currency bank accounts
Some businesses hold a USD or GBP account so they can receive and pay in that currency without converting every time. That changes the matching a little:
- The bank statement is in the foreign currency, so you reconcile it in that currency
- The A$ value of the balance moves every day with the exchange rate, which creates unrealised gains and losses on the account itself
- When you transfer between the foreign account and your AUD account, the conversion is where the gain or loss is realised
If you're receiving regular foreign income, a foreign currency account can save on conversion costs. It also adds a reconciliation to your month-end. Worth it for some, not for others.
Common mistakes
- Recording the foreign amount as if it were AUD. A US$5,000 bill recorded as $5,000 is wrong by over $2,600 at the rates above.
- Using today's rate for an old invoice. The invoice is recorded at the rate on its date. The difference at payment goes to FX gain or loss.
- Hiding FX differences in the expense account. If the extra $120.19 goes into "Purchases", your cost of goods looks wrong and you can't see how much currency movements are costing you.
- Lumping fees into FX. Keep them separate, as above.
- Not asking about tax treatment. How FX gains and losses are treated for tax can be complicated. Keep the bookkeeping clean and let your accountant handle that side.
A month-end checklist for multi-currency
- [ ] Every foreign invoice and bill recorded at the rate on its date
- [ ] Every payment recorded at the rate on the payment date, with the difference to FX gain or loss
- [ ] Bank and transfer fees recorded separately
- [ ] Foreign currency bank accounts reconciled in their own currency
- [ ] Open foreign balances listed so you or your accountant can decide whether to revalue
- [ ] GST coded correctly on imports and exports (your BAS agent or accountant handles lodgement; ask them about GST on imported goods if you're unsure)
How HelloBooks helps
Multi-currency with auto FX is a HelloBooks Pro feature (A$30/month), along with AI auto-categorisation, unlimited bank connections and AI Analysis on every report. You can connect your bank accounts (most Australian banks and cards) or import CSV statements, and the reconcile screen suggests a match for each line with a confidence score and the reason for it, so you're working through exceptions rather than every transaction.
If your business grows into several entities trading in different currencies, the Business plan (A$120/month) adds multi-entity support. See pricing and AI bookkeeping software.
FAQs
What's the difference between a realised and unrealised FX gain?
A realised gain or loss happens when a foreign invoice or bill is actually paid. An unrealised gain or loss is the paper difference on balances that are still open at a reporting date, and it can change before payment.
Do I need to record unrealised FX gains and losses every month?
Not necessarily. Many small businesses only revalue open foreign balances at year-end. Your accountant can tell you what suits your reporting needs.
Why did my foreign bill cost more than the invoice amount in AUD?
Because the Australian dollar weakened between the bill date and the payment date, so it took more AUD to buy the same foreign amount. The extra is a realised FX loss.
Should bank fees on international payments go into FX gains and losses?
Keep them separate. Record fees as bank charges so you can see the true cost of currency movements and the true cost of your bank.
Do I need a foreign currency bank account?
Only if you regularly receive or pay in that currency. It can reduce conversion costs, but it adds another account to reconcile each month.
Currencies move whether you watch them or not. Recording them properly just means you know what they're costing you.
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