Freelancing/self-employment newbie here! I’ve never been self-employed before, and I’m about to start a (hopefully ongoing) contract. I was looking for some advice as to whether I’m taking the best approach with regard to recording my finances in Crunch, given my situation.
I will be contracting for a US-based company (remotely, i.e. I will remain based in the UK), and receiving a monthly payment for a fixed number of hours that I work for them.
I have set up a Wise Business Account, so I have both a UK and US account/balance, therefore the company can pay me in USD.
My understanding is I have two options for capturing this in Crunch:
1) I invoice the company monthly in USD. Crunch records a converted GBP value based on the current exchange rate. When the company pays me, I convert it to GBP in my Wise account, and record this amount in Crunch as payment received against the invoice. I record two separate discrepancies - one to account for the difference in exchange rate when I converted to GBP in Wise, and the other to account for the charge made by Wise to convert from USD to GBP.
2) (This was suggested during an ‘Ask an accountant’ session that I had with Crunch). I invoice the US company monthly OUTSIDE of Crunch. They pay me in USD, and I convert to GBP in Wise. I then (retrospectively) raise an invoice in Crunch in GBP for the exact amount of GBP I converted to, and then immediately record payment received for the same amount in GBP - therefore there is no discrepancy, everything matches exactly and all records are recorded in GBP.
Am I correct in thinking these are the two options I have?
Is one better than the other? I guess recording the discrepancy in option 1 affords me some tax relief on the Wise fees for converting the currency (which are relatively small)? But option 2 sounds the simpler.
Any thoughts/recommendations much appreciated!
Thanks very much,