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
On the cash basis, which GOV.UK calls the standard way for sole traders, you record income when you receive it, so a naira invoice that loses value before payment simply produces less income in pounds and less tax: the loss is already in the figures. Under traditional accounting the income was booked at its value on the invoice date, so the lower amount received creates a difference that has to be dealt with in your accounts, ideally with an accountant.
Why this happens
If you invoice a Nigerian client in naira, the number of naira is fixed but their value in pounds is not. If the naira weakens between the invoice and the payment, the same naira buy fewer pounds. Your client has paid in full; you have still lost money in pounds. Our guide to invoicing in pounds or naira explains why the invoice currency decides who carries this risk.
On the cash basis: the loss is automatic
GOV.UK says that on the cash basis you record income only when you receive the money, and you do not pay Income Tax on money you have not yet received. So the income figure is the pound value of the naira when they arrived, not when you invoiced.
Example. Uche invoices a Lagos client ₦3,000,000 on 1 February. On that date the rate is ₦2,000 to the pound (illustrative), so the invoice is worth £1,500. The client pays on 15 April, when the rate is ₦2,400 to the pound (illustrative): the ₦3,000,000 is now worth £1,250.
| Cash basis | Traditional accounting | |
|---|---|---|
| Income recorded | £1,250 on 15 April | £1,500 on 1 February |
| Money received in pounds | £1,250 | £1,250 |
| Difference to deal with | None: income already £1,250 | £250 between income booked and cash received |
On the cash basis there is nothing more to do. The £250 shortfall never became taxable income. Note that the payment also falls into a later tax year here, because 15 April is after 5 April.
Under traditional accounting: a difference to handle
With traditional accounting, GOV.UK says you record income on the date you invoice. In the example, £1,500 was booked in February. When £1,250 worth of naira arrives, your accounts must show what happened to the other £250. It is not a bad debt: the client paid every naira it owed. HMRC's bad debts guidance (BIM42701) is about debts that will not be paid, which is a different situation. The £250 is a loss from the currency moving.
How an exchange difference of this kind is treated for tax depends on how your accounts are drawn up, so ask an accountant to apply the right rule rather than simply cutting the original income figure. Keep the invoice, the rate you used to record it, the date and amount received, and your conversion record.
If you are still holding the naira
Sometimes the client pays on time but you keep the naira, for example in a Nigerian account, and convert months later at a worse rate. On the cash basis your income was fixed when the naira arrived. A later fall in value while you hold the naira is a separate matter from your trading income, so record both dates and amounts and ask your accountant how that later movement is treated in your situation.
Which rate to use when you record
You need a pound figure for each naira amount. HMRC publishes average and monthly exchange rates through the UK Trade Tariff service. If you convert as soon as the money lands, the pounds you actually received are the clearest figure. Use one method throughout the year and keep the workings.
Reducing the risk next time
- Invoice in pounds where the client can pay pounds, so the exchange risk sits with the client.
- If you must invoice in naira, set a short payment term and a fixed conversion date in the contract.
- Agree that the naira amount is recalculated if payment is late, based on a named reference rate.
- Take a deposit up front; see asking Nigerian clients for a deposit.
- Convert naira soon after it arrives if you do not need it in Nigeria.
What to check first
- Are you on the cash basis or traditional accounting? See cash basis or accruals with naira income.
- Note the invoice date, naira amount and pound value at invoice.
- Note the date received and the pounds actually obtained.
- On traditional accounting, list the differences for your accountant at year end.
The same example in pounds per tax year
Timing can matter as much as the rate. In Uche's example, the invoice was issued in the 2026-27 tax year but paid on 15 April 2027, which falls in 2027-28. On the cash basis, the £1,250 is income for 2027-28, not 2026-27, so it is taxed a year later. Under traditional accounting, £1,500 was income for 2026-27, and the £250 difference arises in 2027-28 when the payment is received. That split across years affects the bill you pay each January, and your payments on account, so note both dates in your records.
None of this changes what the client owes. If your contract was in naira, the client has discharged it by paying the naira. Only a pound-denominated contract, or a clause that resets the naira amount when payment is late, moves the currency risk back to the client.
Where Pryme fits
With a Pryme Business Account, naira from Nigerian clients stays in naira until you choose to convert with Swap, which shows the rate first and the fee on its own line before you approve. Each conversion is recorded, which gives you the date and the pounds received for your books. See business multicurrency accounts.
Questions people ask
Do I pay tax on the full naira invoice if the naira fell before payment?
Not on the cash basis. You record the pound value of what you actually received, on the day it arrived.
Is a currency loss on a naira invoice a bad debt?
No. If the client paid every naira owed, the debt was paid. The shortfall in pounds comes from the exchange rate, not from non-payment.
How do I handle the loss under accruals?
Income was booked at the invoice-date value, so the lower amount received leaves a difference in your accounts. Ask an accountant how to treat it.
How can I avoid losing money when the naira falls?
Invoice in pounds where possible, set short payment terms, and agree a fixed conversion date or a reset clause in the contract.
Sources
- GOV.UK: Cash basis (page updated 5 Oct 2026) · accessed Oct 2026
- HMRC average exchange rates, UK Trade Tariff · accessed Oct 2026
- HMRC Business Income Manual BIM42701: bad and doubtful debts, overview (updated 4 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.