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
Keep each company's books in its functional currency, the currency of the main economic environment it operates in under IAS 21, and record every foreign-currency transaction in that currency at the rate on the day. Run a separate bank ledger for each currency account, reconcile each one monthly in its own currency, and post the differences that arise from rate movements to a dedicated exchange gain or loss account.
Start with the functional currency
A diaspora business often has money in two places: a company abroad earning pounds or dollars and a Nigerian company or account paying staff and suppliers in naira. The first decision for each entity is its functional currency. IAS 21, the international accounting standard on exchange rates, defines it as "the currency of the primary economic environment in which the entity operates". Paragraph 9 says to look mainly at the currency that drives sales prices and the currency of labour, materials and other costs. Paragraph 12 says that when the signs are mixed, management judges which currency most faithfully represents the business, giving priority to those main indicators.
| Entity (example) | Sales priced in | Costs paid in | Likely functional currency |
|---|---|---|---|
| Lagos company selling to Nigerian customers | Naira | Naira | Naira |
| UK company billing UK clients, with a Lagos team paid as contractors | Pounds | Mostly pounds, some naira | Pounds |
| Nigerian software firm selling only to US clients in dollars, staff paid in naira | Dollars | Naira | Judgement needed; see paragraph 12 |
Each legal entity has its own functional currency. A group with a UK parent and a Nigerian subsidiary normally keeps two sets of books, one in pounds and one in naira, and combines them only for group reporting. The presentation currency, the one the accounts are shown in, can differ from the functional currency.
The ledger structure
- One general ledger per entity, in its functional currency.
- One bank ledger for each currency account, showing balances in the account's own currency and the functional-currency equivalent.
- Debtors and creditors tagged by currency, so a naira invoice is tracked in naira as well as in the functional currency.
- A single "foreign exchange gains and losses" account in the profit and loss for differences from rate movements.
- A written note of which rate source you use and when; see which naira rate to use.
Recording transactions
IAS 21 paragraph 21 says a foreign-currency transaction is recorded in the functional currency at the spot rate on the transaction date. Paragraph 22 allows an average rate for a week or month for practical reasons, but says that if exchange rates fluctuate significantly, using an average is inappropriate. With the naira, months of sharp movement are common, so many businesses use daily rates for large items and keep averages only for small, frequent ones.
Worked example (illustration only)
A UK company with pounds as its functional currency pays a Lagos supplier ₦2,000,000 on 5 March. The illustrative rate that day is ₦2,000 to £1, so the books record an expense of £1,000 and a payment of £1,000 from the naira bank ledger. The naira ledger also shows ₦2,000,000 leaving, so it can be checked against the naira statement. These rates are invented for the example and are not market rates.
Monthly reconciliation
- Reconcile each bank account in its own currency first: the naira ledger to the naira statement, the dollar ledger to the dollar statement.
- Only then check the functional-currency values, and revalue monetary balances at the closing rate (see revaluing naira balances at month end).
- Match transfers between your own accounts on both sides, so a conversion from pounds to naira shows the pounds out, the naira in and the difference as an exchange gain or loss or a fee.
- Post bank charges, stamp duty and transfer fees separately, not buried in the exchange line.
The most common error is reconciling only in the functional currency. A naira account can look right in pounds while a missing ₦50,000 payment hides behind a rate change. Reconciling in naira first catches it.
Rules on records in Nigeria
The Nigeria Tax Administration Act 2025 section 31 requires books and records with enough detail to work out tax, kept in English and for at least six years after the year of assessment. For payroll, DLA Piper notes that pay in foreign currency is converted at the CBN official rate at the time it is paid for PAYE. Keep the rate you used with each conversion. The Ledger's simple bookkeeping system for Nigerian businesses covers the basics on the naira side.
If a Nigerian subsidiary keeps naira books and the parent abroad keeps pound or dollar books, agree one month-end date and one rate source for both, so intercompany balances match when they are compared.
Software
Check that your accounting software supports multiple currencies on bank accounts, invoices and bills, lets you enter your own rate when needed, and runs an unrealised gains and losses report at month end. Our guide on checking accounting software for naira support lists what to test.
Where Pryme fits
A Pryme Business account holds naira, dollars, pounds and euros with local details for each, and every Swap shows the rate and fee before you approve, which gives you the rate record for each conversion. The Finance agent can prepare monthly reconciliations for a person to review.
Questions people ask
What is a functional currency?
Under IAS 21, the currency of the primary economic environment where the entity operates, judged mainly by the currency of its sales prices and costs.
Can a Nigerian company keep books in dollars?
A company whose economics are mainly in dollars may have the dollar as its functional currency under IAS 21; Nigerian tax rules on records and returns still apply. Ask your accountant.
Should I use daily or monthly average rates?
IAS 21 allows averages for practicality but says they are inappropriate when rates fluctuate significantly, which is often the case with the naira.
How do I reconcile a naira account in a UK company's books?
Reconcile it in naira against the bank statement first, then revalue the balance into pounds at the closing rate.
Sources
- IFRS Foundation: IAS 21 The Effects of Changes in Foreign Exchange Rates (2026) · accessed Oct 2026
- Nigeria Tax Administration Act 2025 (gazette copy) · accessed Oct 2026
- DLA Piper Africa: FAQs on payroll taxes and employer liability in Nigeria (28 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.