Definition
An exchange rate is the value of one currency expressed in another. On a multi-currency invoice, the exchange rate determines how much the seller actually receives in their home currency, and it can change between the invoice date and the payment date. Some invoices state the rate used so the client's records match the seller's.
Exchange rate in practice
For accounting, record the invoice at the rate on the invoice date and recognize any difference at payment as a foreign exchange gain or loss. Banks and payment providers also add a spread to the rate, which reduces the amount received.
Frequently Asked Questions
Who bears the exchange rate risk on an invoice?
Whoever is not invoicing in their own currency. If you invoice in the client's currency, you bear the risk. If you invoice in yours, the client does.