The Short Answer
For most freelancers and small businesses: Use the spot rate on the invoice date. Document the rate and source on your invoice. Done.
The Three Exchange Rate Methods
1. Spot Rate (Invoice Date)
Most CommonUse the exchange rate on the day you issue the invoice.
Pros:
- • Simple to implement
- • Easy to verify
- • Accepted by most tax authorities
Cons:
- • Rate may differ from payment date
- • Currency fluctuation risk
Use this when: You're a freelancer, invoice irregularly, or have short payment terms.
2. Fixed Contract Rate
Agree on a specific exchange rate at the start of a project or contract.
Pros:
- • Predictable income
- • No rate disputes
- • Good for long projects
Cons:
- • May lose if rate moves in your favor
- • Needs upfront agreement
Use this when: Large projects, retainers, or high-value contracts where currency risk matters.
3. Payment Date Rate
Use the exchange rate on the day the payment is received.
Pros:
- • Matches actual received amount
- • No conversion gain/loss
Cons:
- • Can't know invoice value upfront
- • Complex accounting
- • Not accepted everywhere
Use this when: Rarely—mostly for accounting reconciliation purposes.
How to Document the Exchange Rate
Whatever method you choose, document it on your invoice. Here's a simple format:
Add to your invoice footer:
Exchange Rate: 1 EUR = 1.0842 USD
Rate Date: January 9, 2026
Source: European Central Bank
Reliable rate sources
- • XE.com — Industry standard, widely available
- • European Central Bank — Official EU rates
- • Google Finance — Easy access, well-documented
- • Your bank's published rate — If you have a business account
Tax Implications
Important for tax reporting
You'll need to convert foreign currency invoices to your local currency for tax reporting. Most jurisdictions accept the invoice date rate, but check with your accountant.
What you need to track:
- Original invoice amount (foreign currency)
- Exchange rate used and date
- Converted amount (local currency)
- Actual received amount (if different)
Automate Exchange Rate Tracking
Our multi-currency invoice template automatically fetches live exchange rates, documents them on your invoices, and handles all conversions automatically. No manual work.