You invoiced a client $5,000. Four weeks later your bank shows a credit in your own currency, and the number is not the one you had in your head when you sent the invoice. Which of the figures is the “real” one, and which exchange rate belongs in your records?
Freelancers who bill in a foreign currency run into this the first time the money lands. There are three plausible rates, they give three different answers, and only one of them is the right one for each job.
Use the mid-market rate for the invoice date to say what the work was worth when you billed it, and the mid-market rate for the payment date to say what the money was worth when it arrived. What your bank actually credited is a third number: the gap between it and the payment-date rate is your conversion cost. Take the rates from a dated published source, such as the European Central Bank, and use the same source every time.
The three rates on every foreign currency invoice
An exchange rate is the price of one currency in another, and it changes every day. A single foreign invoice touches three of them:
- The invoice-date rate. What the invoice amount was worth in your home currency on the day you issued it. It tells you what you thought you were earning.
- The payment-date rate. What the same amount was worth on the day the client paid. It tells you what the money was actually worth when it arrived.
- The rate your bank or provider applied. What you were really credited. It is the payment-date rate minus whatever margin the provider took, which is rarely shown as its own line.
The first two differ because time passed. The third differs from the second because someone was paid to convert the money. Mixing them up is how people end up blaming the exchange rate for a fee, or a fee for the exchange rate.
A worked example
The numbers below are made up to show the arithmetic, not real quotes. Say you bill in US dollars and your home currency is the euro.
| Step | Figure | In euros |
|---|---|---|
| Invoice issued, 3 March | $5,000 at 0.9200 | €4,600 |
| Client pays, 31 March | $5,000 at 0.9050 | €4,525 |
| Bank credits your account | €4,480 |
Three things happened here:
- The currency moved against you: €75. The dollar was worth less in euros by the time the client paid. That is exchange-rate risk, and nobody did anything wrong.
- Your provider kept €45. That is the gap between the payment-date value (€4,525) and what landed (€4,480), about 1% of the payment. That is a conversion cost, not market movement.
- You got €120 less than the invoice implied. Of that, €75 is the market and €45 is the route.
You can only separate the two if you know the payment-date rate from a source other than your bank. If the provider’s number is the only one you have, the margin and the movement look like one lump.
Which rate to use for which job
To record what the work was worth: the invoice-date rate. Use it when you want to know what a project earned at the time you billed it, or when you compare what different clients pay you. It keeps the figure tied to the price you agreed.
To record what you actually received: the payment-date rate. Use it when you need the value of the money on the day it arrived. This is the figure that usually matters for your books, and the one to ask your accountant about.
To judge your payment route: the payment-date rate again, against the credit. Compare what landed with the payment-date mid-market figure. If the gap is under 1%, the route is competitive. If it is past 3%, it is worth changing. What your payment provider actually keeps walks through the thresholds.
Not for any of these: the rate on a random day. Using today’s rate on a payment from last quarter is the most common mistake. It looks harmless and quietly rewrites your history.
Where to get a rate you can cite
Use the mid-market rate, the midpoint between what buyers and sellers are quoting, with no margin added. It is the neutral reference, and the one a provider’s rate should be measured against.
The practical requirement is that the source is dated and repeatable. The European Central Bank publishes a reference rate for each working day, so anyone can check your figure later. The historical currency converter gives you that rate for any past date, which means you can look up the invoice date and the payment date in a minute each.
Two habits keep the records clean:
- Pick one source and stay with it. Switching between sources month to month produces small unexplained differences that waste an accountant’s time.
- Note the rate and the date next to the amount. A figure without a date can’t be checked. A figure with one can be checked by anyone.
Reference rates are published for working days. For a payment that landed on a weekend or a public holiday, use the previous working day’s rate and say so.
Check what your route actually cost
Once you have the payment-date rate, the cost of the conversion is one subtraction. Take the amount you were credited, compare it with the amount you would have received at the mid-market rate, and divide.
The forex markup calculator does this for you. Enter what you billed, what landed and the date, and it separates the markup from the market movement. It also gives you a number to take to a provider, or to compare across routes before you tell your next client where to send the money.
If you are still deciding which currency to bill in at all, invoice in your currency or your client’s covers who carries the risk in each case.
This is general guidance, not tax or accounting advice. Which date’s rate you must use for tax, and whether an average rate is allowed, varies by country. Confirm the convention with a local accountant once, then apply it consistently.
Frequently asked questions
What exchange rate should I put on a foreign currency invoice?
You don’t need to put a rate on the invoice at all. State the amount due in one clearly named currency, such as USD. If you want to show a converted figure for reference, label it indicative and say which rate and date it uses, so the client doesn’t treat it as a second amount to pay.
Should I use the invoice date or the payment date rate?
Both, for different purposes. The invoice-date rate shows what the work was worth when you billed it. The payment-date rate shows what the money was worth when it arrived, which is usually the one your books need. Ask your accountant which your country expects, then use it consistently.
Why is the amount in my bank less than the converted invoice total?
Two reasons are mixed together: the exchange rate moved between invoicing and payment, and your bank or provider added a margin when it converted. Comparing the credit with the payment-date mid-market rate separates them. The first is market risk; the second is a cost you can often reduce.
Where can I find historical exchange rates?
Central banks publish dated reference rates, and the European Central Bank’s daily rate is widely used. The historical currency converter on this site returns that reference rate for any past date. Choose one source and record the date next to the figure, so anyone can check it later.
Where Billable comes in
Billable lets you set the currency on each invoice, or on a project so every invoice under it starts out in the right one. Your dashboard converts everything back to your home currency at rates refreshed daily, so totals across clients stay comparable.
When an invoice is paid, you record what actually arrived, and Billable shows the gap between that and the reference rate, so the cost of a route is visible instead of hiding in the credit. It’s free for your first active project, with flat plans after that and no per-user fees. See how multi-currency billing works.