UK Currency Payments and Exchange Losses

[Alexia1970]

Hello, this is my first post to this forum, and I hope I've chosen the most appropriate board to post it. I have a question on Currency Payments and associated Exchange Gains or Losses, and I'm posting from the United Kingdom.

A company owes a supplier €285.00 but erroneously makes a payment out of a USD account of $285.00 into the recipient's EUR account. The supplier receives €263.00 and thus are shorted €22.00. Besides the normal fluctuations in exchange rates, is there any further loss to the company making payment, except that they must pay an additional €22.00 which they owed in the first place?

Many thanks!

 

[Bored Accountant]

I'm not entirely sure what you're looking for. Like you said, the supplier will probably contact the company and state that they are €22.00 short; but I've never heard of anything extra being tacked on. At the very worst, the supplier might ask the company to pay a late fee (providing the company paid right at the due date); but with exchange rates being so different, most overseas companies are very understanding of this situation and will often waive the late fee. So no, I can't think of any sort of "extra" fee or loss the company would have in this specific situation.

 

[Alexia1970]

Thanks for your response, @Bored Accountant, much appreciated!

I've been doing accounting for many years now, and something similar to this example happened with my current employer. And - using this example - I was told that the error in payment would cost our company an "extra" €22.00. But from what you've said, and from what I thought as well, it's nothing more than what we owed in the first place. I think I was misled a bit and hoped it was not something I was missing entirely. Thanks very much.

 

[Bored Accountant]

Thanks for your response, @Bored Accountant, much appreciated!

I've been doing accounting for many years now, and something similar to this example happened with my current employer. And - using this example - I was told that the error in payment would cost our company an "extra" €22.00. But from what you've said, and from what I thought as well, it's nothing more than what we owed in the first place. I think I was misled a bit and hoped it was not something I was missing entirely. Thanks very much.

If worse comes to worse, you could always ask the supplier to explain what they mean by "we own an extra amount". Obviously, they aren't going to hide it if it's a legitimate charge. But like you said, it probably was just the short amount of money due to differences in exchange rates. It's probably nothing to worry about.

Anyways, I'm glad I could help!

 

[Alexia1970]

If worse comes to worse, you could always ask the supplier to explain what they mean by "we own an extra amount".

The supplier was exceptionally understanding! I'll have to get the facts straight from my own organisation, because that's who said the error creates such a loss for us, not the supplier. Very naughty of my own superiors, i'd say.

Thanks again.