Before You Start

This guide assumes you have a Xero Premium subscription with multi-currency enabled and understand basic foreign exchange concepts.

Overview

25 min
Setup Time
Advanced
Difficulty
Monthly
Maintenance

What You’ll Learn

  • How to enable and configure multi-currency in Xero
  • Understanding foreign exchange gains and losses
  • Steps to generate consolidated reports
  • Best practices for reconciling multi-currency accounts

1. Preparation Steps

To ensure accurate consolidation, set up these in Xero first:

Required Accounts

  • Base Currency (e.g., USD)
  • Foreign Currency Bank Accounts
  • Foreign Exchange Gains/Losses (Income/Expense)
  • Consolidation Adjustments (Equity)

Optional (but recommended)

  • Intercompany Loan Accounts
  • Translation Reserve (Equity)
  • Foreign Currency Payable/Receivable

2. Understanding Exchange Rates

You have two main options, each with serious pros and cons for consolidation.

Method A: Manual Rate Entry

This involves manually inputting exchange rates for specific transactions.

Pros:
  • Full control over specific rates.
  • Useful for large, infrequent transactions.
  • Prevents unexpected fluctuations.
Cons:
  • Time-consuming for frequent transactions.
  • Risk of human error.
  • Can diverge from market rates.

Method B: Xero’s Daily Rates

This relies on Xero’s automated fetching of daily exchange rates.

Expert Tip: For most operational purposes, relying on Xero’s automated daily exchange rates is ideal. Only consider manual entry for specific, high-value transactions that require a precisely fixed historical rate.

3. Consolidation Workflow

Here is the high-level workflow for generating consolidated reports.

Here is a sample code block to show how an API call might look for fetching rates.

{
  "currency_code": "EUR",
  "base_currency": "USD",
  "exchange_rate": 1.085,
  "effective_date": "2025-09-30",
  "source": "Xero API"
}

4. Generating Consolidated Reports

  1. 1

    Review Foreign Currency Balances

    Navigate to Accounting > Reports > Foreign Currency Gains and Losses. Review unrealized and realized gains/losses.

  2. 2

    Run Consolidated Reports

    Use a third-party reporting tool (e.g., Fathom, Spotlight) that connects to Xero for true consolidation reports.

  3. 3

    Manual Adjustments (if needed)

    For complex consolidations, export trial balances and perform manual adjustments in a spreadsheet for intercompany eliminations.

Common Error: Incorrect Base Currency Setup

Ensure your organization’s base currency is correctly set in Xero settings before processing any foreign currency transactions. Changing it later can cause data integrity issues.

5. Reconciliation & Best Practices

Consolidation Checklist

  • Reconcile foreign currency bank accounts daily.
  • Review FX Gains/Losses report monthly.
  • Regularly update exchange rates (if not automated).
  • Understand impact of FX movements on KPIs.

Need Help?

Consolidation Support

Having trouble consolidating your multi-currency reports? Our team can help troubleshoot your specific Xero setup.

Contact Us