AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
The short answer
Most UK companies keep their books in sterling, their functional currency. Under FRS 102 section 30, each naira transaction is recorded at the spot rate on its date (or an average rate if rates do not move significantly), naira bank balances and debts are retranslated at the closing rate at each reporting date, and the differences generally go to profit or loss. A Nigerian subsidiary keeps its own books in naira.
A business with customers, suppliers or staff in Nigeria ends up with naira invoices, naira bank balances and sometimes naira loans. If those are not recorded consistently, the accounts drift: balances that do not match the bank, gains and losses no one can explain, and a tax computation that is hard to defend. The rules are not complicated once you see the three questions they answer.
Question 1: what is your functional currency?
The functional currency is the currency of the main economic environment the company operates in. HMRC's Corporate Finance Manual (CFM61050) notes that most UK companies have a sterling functional currency and prepare sterling accounts, and that a company may in some conditions be required to use another. For a UK company that sells mainly in the UK and pays some Nigerian costs, sterling is almost always right. For a Nigerian subsidiary operating in Nigeria, the naira usually is. Your accountant confirms this; it is a judgement on facts, not a choice.
Question 2: what rate do you record at?
HMRC's Business Income Manual (BIM39510) summarises FRS 102 section 30:
- Record each foreign-currency transaction at the spot rate on the transaction date.
- An average rate for a period is allowed if rates do not fluctuate significantly. The naira has moved sharply at times, so check whether averaging is reasonable for each period.
- HMRC does not require its own published rates; use a reasonable, consistent source and keep a record of it.
Question 3: what happens at month or year end?
Monetary items, which include naira cash, naira bank balances, and naira amounts owed to or by you, are retranslated at the closing rate at each reporting date. The difference between the old sterling value and the new one is an exchange gain or loss, generally in profit or loss. Non-monetary items, such as equipment bought in naira, stay at the historical rate.
| Item | Recorded at | Revalued at period end? |
|---|---|---|
| Naira sales invoice | Spot rate on invoice date | Yes, while unpaid |
| Naira bank balance | Rate on each transaction | Yes |
| Naira supplier bill | Spot rate on bill date | Yes, while unpaid |
| Laptop bought in naira | Spot rate on purchase date | No |
| Naira loan to subsidiary | Spot rate when lent | Yes |
Realised and unrealised
A realised difference arises when the transaction settles: you invoiced at one rate and were paid at another. An unrealised difference arises when you revalue an open balance at period end. Both usually go through profit or loss. For the corporation tax treatment, see FX gains and losses on naira balances.
Worked example (illustrative)
Example, illustrative rates only: on 1 March a UK company invoices a Lagos client ₦4,000,000 when the rate is ₦2,000 to £1, so it records £2,000 of sales. At 31 March the invoice is unpaid and the rate is ₦2,100, so the debt is worth £1,904.76; the company books an unrealised loss of £95.24. On 15 April it is paid at ₦1,950, worth £2,051.28. Compared with the 31 March value, that is a realised gain of £146.52 in April. Across both months, the net effect is £51.28 more than the original £2,000.
Two sets of books in a group
- UK company: sterling books, with naira bank accounts and balances set up as foreign currency accounts.
- Nigerian subsidiary: naira books, kept under Nigerian rules. The Nigeria Tax Administration Act 2025 requires records in English, kept for at least six years.
- Group accounts: FRS 102 section 30 has separate rules for translating a foreign operation's accounts on consolidation; your accountant applies them.
- Intercompany balances: agree the amount and currency every month on both sides, or they will not eliminate on consolidation.
Software set-up is covered in setting up naira in Xero or QuickBooks. The Nigeria library explains revaluation and realised gains for Nigerian-based businesses.
Withholding tax and fees
If a Nigerian client deducts withholding tax from your invoice, record the deduction against the debt when you receive the receipt, in naira, rather than leaving a small unpaid balance. Bank fees on naira transfers are expenses, not exchange differences; record them separately so the exchange line shows only rate movements.
Monthly checklist
- Import every naira bank transaction and reconcile to the statement.
- Check each naira invoice and bill is recorded in naira, not converted by hand.
- Run the revaluation at the closing rate and keep the rate source.
- Agree intercompany balances with the subsidiary.
- Keep receipts and transfer confirmations with each payment.
Where Pryme fits
A Pryme Business Account keeps GBP and NGN balances separately, each with its own statement, which makes reconciliation cleaner. Every conversion through Swap shows the rate and fee, so you have the actual rate for the records. Verifiable statements and receipts through Pryme's partnership with VerifyDoc.ai can be checked by an auditor (receipts).
Questions people ask
What is functional currency?
The currency of the main economic environment a company operates in. Most UK companies use sterling; a Nigerian subsidiary usually uses naira.
Which exchange rate should I use for naira transactions?
The spot rate on the transaction date, or an average if rates do not fluctuate significantly. HMRC does not require its own rates; be reasonable and consistent.
Do I revalue naira bank balances?
Yes. Monetary items such as bank balances and unpaid invoices are retranslated at the closing rate at each reporting date.
What is the difference between realised and unrealised FX gains?
Realised arises when a transaction settles at a different rate; unrealised arises when an open balance is revalued at period end.
Sources
- HMRC Corporate Finance Manual CFM61050: non-sterling functional currency (updated 27 Aug 2026) · accessed Oct 2026
- HMRC Business Income Manual BIM39510: foreign exchange, FRS 102 section 30 (updated 4 Aug 2026) · accessed Oct 2026
- Nigeria Tax Administration Act 2025 (gazette copy) · accessed Oct 2026
- HMRC Corporate Finance Manual CFM61070: exchange gains and losses on loan relationships (updated 27 Aug 2026) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.