Table of Contents

Overview

There are a number of processes in the system that might use foreign currency transactions

1. Purchasing from foreign suppliers
2. Selling to foreign customers
3. Managing Foreign currency bank accounts

Core Concepts

1. Any entity you deal with in a foreign currency - all transactions will be in that currency
2. Your GL is always in local currency
   1. So transactions are always converted using the exchange rate to local currency
   2. Transactions will have their own exchange rate
   3. Reconciling transactions with different exchange rates (payment to invoice or credit note to invoice etc) will result in a realised gain or loss journal being created
3. Bank accounts may have no transactions - however due to exchange rate movements you may need to revalue the local currency equivalent in the system
4. Exchange rates can be maintained centrally and will default onto transactions - however they may be overwritten at the transaction level.
5. Bank Reconciliation is in the foreign currency
6. When creating Journals from the bank reconciliation screen > the FX value is fixed based on the value on the bank statement upload
7. Changes
   1. If the FX Rate is changed:
      1. If the journal has a bank account and has been cleared in a bank rec then the amount of the bank account currency will be preserved and the other  currency amount will be recalculated using the changed FX Rate.
      2. Otherwise the user will be asked if the local or foreign currency amount should be recalculated.
   2. If the local currency amount is changed:
      1. If the journal has a foreign currency bank account and has been cleared in a bank rec then the FX Rate will be recalculated.
      2. Otherwise the user will be asked if the foreign currency amount or the FX Rate should be recalculated.
   3. If the foreign currency amount is changed:
      1. If the journal has a local currency bank account and has been cleared in a bank rec then the FX Rate will be recalculated.
      2. Otherwise the user will be asked if the local currency amount or the FX Rate should be recalculated.
   4. Allocations are removed and a message displayed when
      1. Allocations exist 
      2. The client is changed (Debtor or Creditor)
      3. Local currency amount of a local currency journal is reduced
      4. The FX currency amount of a FX currency journal is reduced
8. Marketplace Orders
   1. Definition: Drop Ship on behalf of a customer direct to their customer - ie Amazon, Myer Drop Ship, Catch of the Day etc.
   2. Are invoiced in bulk - so many orders are on a single invoice. 
      1. Therefore the FX rate on the order is not relevant - the FX rate on the invoice is and the order must be updated
      2. When an invoice is created for marketplace orders then, for each order:
         1. If the FX rate of the order is different to the FX rate of the invoice then:
            1. Change the FX rate of the order to match the invoice.
            2. Recalculate the GP% of the order and the line margins and save them.
      3. If the FX rate of a debtor invoice is changed and saved and there are marketplace order lines linked to the invoice lines then, for each order:
         1. If the FX rate of the order is different to the FX rate of the invoice then:
            1. Change the FX rate of the order to match the invoice.
            2. Recalculate the GP% of the order and the line margins and save them.

Selling or Purchasing in a foreign currency

Set currency on Company

The company you are dealing with needs to be linked to their currency

Setup Bank Codes on Creditor or Debtor

Supplier (Creditor) and Purchase Orders will be in this currency

The currency on the company shows on the Creditor (and Debtor)

The purchase order follows the same processes as any other purchase order.

Stock receipt journals will still be in the system normal base currency).

Creditor Invoice

The resulting invoice journal will show both the foreign currency and the local currency.

So while the invoice shows the foreign currency amounts - you can see that it is recorded in the GL in the local currency.

The amount outstanding on the Supplier shows in the FX currency as well as the system base currency.

Creditor Invoices for FX Purchase Orders that have a deposit the same as the final invoice amount

When an invoice is created for a PO with

• FC total prepaid
• and small local currency balance
• then create a creditor general journal to transfer the local balance from Trade Creditors to Write Off (small) GL account.
• The amount will be allocated between the 2 journals and both will be marked as fully allocated.

Manual small local amount write off for any FX Creditor invoice

If a creditor invoice is

• in a foreign currency
• the foreign currency balance is zero
• the local currency balance is not zero (might be credit or debit)
• and the open amount equals the local currency balance then the Action menu will have an option to 'Write off small local currency balance'. Choosing this will create a journal as described above.

Creditor invoices for Shipping Agents (that include 100% GST lines)

Creditor Payment

When allocating a foreign currency payment or credit to a foreign currency invoice the local currency amount on each side is compared to determine if an adjustment should be written to match the local currency amounts.

1. The local currency amount of the payment or credit is calculated as the foreign currency amount being allocated divided by the exchange rate of the payment or credit.
2. To calculate the foreign currency amount of the invoice:
   1. Calculate the exchange rate as the foreign currency total of the invoice divided by the local currency total.
      1. This calculated rate is used because it is based on the invoice total.
      2. The exchange rate of the invoice is applied to each line of the invoice then the foreign and local currency totals are accumulated.
      3. Because of rounding differences on each line there can be a difference between the 2 exchange rates.
3. The local currency amount of the invoice is calculated as the foreign currency amount being allocated divided by the exchange rate calculated as described above.
4. If there is a difference between the local currency amounts then a Creditor credit note or a Creditor general journal is created to balance the local currency amount, with no foreign currency amount

Bank Accounts

Foreign Currency Bank accounts are setup by setting up the GL Account to be in the fixed currency.

All other transactions involving this account remain the same.

Every journal in this account will have a foreign and a local currency value at the time of the transaction.

Bank Reconciliation for FX bank accounts

The Bank Req will show in the foreign currency values - see Bank Reconciliation - Statement centric - uploaded and remembered bank statement lines

Transferring funds from or to Foreign Currency Bank Accounts

Funds can be transferred from or to Foreign currency bank accounts

When transferring to or from an FX account the FX rate to be used on the FX account side of the journal is calculated from the ratio of the AUD balance of the account to the FX balance of the account.

The FX rate to be used on the other account side of the journal is the rate shown in the transfer wizard. This rate defaults to the system currency table rate but can be manually changed.

An FX adjustment line is written to ensure that the AUD amounts balance.

When transferring from one FX account to a different FX account use the wizard twice to to transfer via a clearing account

First journal is from USD to clearing account.  Second journal is from clearing account to GBP account.

Revaluing Foreign Currency Bank Accounts

Foreign currency bank accounts may need revaluing if the exchange rate changes.  

For example if you had USD$60,000 and the AUD amount for this on your balance sheet was AUD$100,000 (6:1 exchange rate)

Sometime later you have not had any transactions = but the exchange rate was now 9:1 (ie now worth AUD$66,667  you would want to recognise a loss on the exchange rate of AUD$33,333

Normally this in only done at the end of a reporting period - but it can be done anytime

Can access from the Action menu on the bank account

A general journal will be created between the FX bank account and the account you have setup in GL Control Accounts for Foreign Currency Gains / Losses (normally an operating expenses account)

Setting Currencies

Default currencies in the system is set in the Currency screen

Selling in Foreign Currencies

Setup the Currency on the Company for this Customer (this cannot be changed once transactions exist)

Capturing a FX Sales Order

It is common that overseas transport will be involved - and may have a fixed rate for the sales order

You may print a Proforma invoice to send to your customer from the sales order before an invoice is created.

View of the invoice

The Invoice rate will default from the order - or the systems latest rate - or can be set on the invoice

Note that the Invoice PDF may have shipping details from the sales order

Information for FX customer orders and invoices may also be held on the SKU

Foreign Currency Debtor Payments

1. Financials menu, Advanced, Foreign currency debtor payment:
   1. Must be used if customer uses FC.
   2. Must not be used if customer does not use FC.
   3. Automatically used if:
      1. Debtor payment opened from FC customer's Transactions list.
      2. New payment started from FC customer's Action menu,
         1. FC amount from customer's total FC owing.
         2. AUD amount from customer's Total Owing.
         3. FX rate calculated as the relative rate between them.
      3. 'Record a payment for this invoice' chosen from FC debtor invoice Action menu:
         1. FC amount from invoice open FC amount.
         2. FX rate from invoice.
         3. AUD amount calculated from FC amount using FX rate.
   4. When a customer is selected on an FC debtor payment form:
      1. FC amount from customer's total FC overdue (i.e. excluding current). 
      2. AUD amount from customer's Payment Due.
      3. FX rate calculated as the relative rate between them.
   5. On a new FC debtor payment the bank account will default to the lowest sequence bank account in the same currency as the customer. If no bank account in the customer's currency then the default debtor bank account.
   6. The FC amount, the FX rate and the local amount are all editable on a FC debtor payment form.
   7. If the FX rate is empty and either the FC or local amount is changed then the FX rare will be calculated as the relative rate between them.
   8. If the FC amount is changed then the local amount will be recalculated using the FX rate.
   9. If the local amount is changed then the FC amount will be recalculated using the FX rate.
   10. If the FX rate is changed then the local amount will be recalculated using the FC amount.
2. Allocation:
   1. If a FC debtor payment is allocated to an invoice with a different FX rate then an adjustment journal will be written for the difference between the allocation amount converted to local currency using the payment FX rate and the allocation amount converted to local currency using the invoice FX rate.
   2. The adjustment journal will have local currency amounts only.
3. Local currency bank account:
   1. If a FC debtor payment is made to a local currency bank account then the Trade Debtors line will have an FC amount but the bank line will not.
4. Allow change of foreign currency exchange rate of a Locked debtor invoice, with no lines cleared in a bank rec, linked to a sales order with all lines flagged as Drop Ship and the user is allowed to modify locked journals.
   1. AUD amounts will be recalculated on all lines