Essential Currency Tips for Canadian resellers
If you want to sell on American or other international clothing resale platforms as a Canadian, inevitably you will run into some currency-related challenges. What’s the best way to accept USD payments? When and how should you convert your USD into CAD? How do you track USD transactions in your accounting or bookkeeping system? Between exchange rates, conversion fees, and reporting, Canadian resellers need to juggle a lot to make sure their hard-earned profits don’t slip through the cracks. In this guide, we’ll break down the essentials related to how to receive payments in other currencies, converting those funds into Canadian dollars for the least possible cost, and managing your finances as a Canadian seller.
Important: If you’re based outside of Canada but also conduct business in currencies other than your own, many of the tools and tips suggested in this article will still be applicable to you.
How to receive U.S. and foreign payments
Before you can conduct any business in the United States or other countries that don’t natively support Canadian dollars (CAD), you need to set up some way to receive funds in other currencies. Typically this will be U.S. dollars (USD), and there are several popular solutions. For this article, I will be covering 4 specific options that might be great options for your resale business.
PayPal is one of the easiest ways to receive funds in USD as a Canadian seller. For platforms that support PayPal, all you need to provide is an email address and you can start accepting payments in USD. It’s easy to receive funds, convert to CAD, and move money to a Canadian account. Of course, this convenience comes at a cost; fees are higher than alternatives, it can be hard as an individual to transfer funds out to a USD account (forcing you to convert to CAD at a premium), and PayPal can only support basic financial transactions.
For individual sellers (i.e. not a corporation), my preferred alternative is Wise (formerly TransferWise). With Wise, it’s easy for organizations to pay you in USD, CAD, or other currencies you choose, to convert between currencies at very favourable rates, and to transfer funds to accounts at local banks. Rates are significantly lower than using PayPal alone, but it’s not suitable for selling directly to customers on your website; it’s great though for receiving funds directly from platforms like Poshmark U.S. and Depop. As in the screenshot below, there are a number of scenarios where it makes things easier for me to have local accounts for receiving funds in the United States, Canada and Australia.
Tip: PayPal usually won’t send USD to a personal USD account at a Canadian bank, but if you use Wise together with PayPal, you’ll have a USD account at a U.S. bank that PayPal can send money to. It’s common for me to send U.S. funds from PayPal to my Wise account, then convert to CAD, and send the CAD to my Canadian bank account.
If you’re a corporation, my top pick for receiving U.S. funds is Vault. Limited to incorporated companies only (yes, I operate as a corporation), Vault is a viable alternative to a bank for me and gives me accounts in CAD, USD, GBP and EUR.
Vault also provides additional benefits that I sometimes need as a small business, like free transfers to Canadian bank accounts, low-cost wire transfers, investment options, unlimited credit cards with cash back, and more. Certainly this is overkill for most individual resellers, but as you grow and need additional services, I have found Vault to be a great choice.
If you sell products from your own website, you will likely need a payment gateway beyond what PayPal can offer alone. For this, I use and recommend Stripe. It allows you to capture credit card payments in USD and CAD, and will send the funds to the account of your choice. If you are selling on third-party platforms exclusively, you won’t need Stripe.
I use and recommend all of the above products for different reasons. If you’re an individual seller, look at Wise and PayPal for receiving funds in USD. For a Canadian corporation, consider Vault as an alternative to Wise. And if you sell any items from your own website, or have a need to collect credit card payments, have a look at Stripe.
Converting foreign currency to Canadian dollars
Whenever you convert funds from one currency to another, you will need to pay a fee and convert at whatever rate the platform that you use chooses. On some platforms, like PayPal, this foreign exchange fee could be as high as 2.5%. The more business you do, the more that adds up, and you’ll quickly find that 2.5% is a lot to lose on every transaction. On platforms like Wise and Vault, a fee of 0.25 to 0.45% on mid-market rates is more common. Make sure you understand the fee and consider comparing it across platforms before you make a trade (sometimes factors like time of day and currencies involved can affect the fee).
As for when to time your transactions, my recommendation is to just convert funds to CAD as you need them and/or to limit your foreign exchange risk exposure. By holding most of your funds in other currencies, you could be facing a bad surprise if there’s a sudden shift in FX rates. I personally don’t like holding more than about $10,000 in other currencies. You will also never be able to time the market perfectly; it’s better to be safe than to be lucky.
Tracking foreign currency transactions
Handling funds in multiple currencies does introduce some tracking and reporting challenges. Do you convert everything to CAD and track it? What FX rate should you use for conversions? How do you account for fees?
The more you sell outside of Canada, the more important it will be to use an accounting/bookkeping platform that supports transactions in multiple currencies. I personally use Xero for this, which is an online accounting platform. Xero allows me to connect my Wise, Vault, PayPal, Stripe, credit cards and bank accounts all together into a unified reporting system. It handles the currency issues automatically and makes it easy for expense tracking and tax filing.
If you choose an alternative, make sure it’s a platform that supports multiple currencies and that your accountant is familiar with it.
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Tax considerations for Canadian resellers
I am neither a tax professional nor an accountant. It’s always best to consult with an expert for anything related to your resale business and the CRA.
As a reseller, it is your responsibility to report all worldwide income, regardless of the currency. CAD, USD, GBP, EUR—whatever you conduct business in, you must track it and report it in your income tax filings. This is where a platform that supports reporting in multiple currencies and working with a professional will be invaluable.
Don’t forget to expense anything related to your business either, regardless of the currency (and even to support your currency conversions!). Platform fees, FX fees, credit card fees—all are deductible from your income.
Want to sell on Poshmark U.S.?
Ultimate Thrifting’s “Poshmark U.S. for Canadians” book will teach you everything you need to know about expanding to the U.S. market. From cross-border shipping to taxes and foreign exchange, this book covers it all!
Conclusion
Mastering foreign exchange and currency management is an essential skill for Canadian resellers selling on U.S. and international platforms. Fortunately, there are tools like Wise, Vault, Xero, and others that help your business stay profitable and compliant with CRA requirements. With the right strategies and tips from this article, you’ll save money and have an easier time managing your money, so you can focus on growing your thrifting empire.
Happy thrifting!
