Foreign Currency Payments ReValuation

Recently I have been asked to describe how Business ByDesign handles the process of managing foreign currency variances.

This particular scenario covers the variance that can happen between payment notification and actual payment confirmation from your bank.

Let me describe the scenario

You have a customer invoice in your ByD system for €1000, your company currency is GBP, so you have maintained a foreign currency exchange rate in your ByD system where €1 = £0.84

Here is the GL Posting for the invoice

the customer then makes a payment of €1000 to clear the invoice  – here now ByD assumes that the full GBP amount is also received. And makes this posting.

Of course when you come to reconcile the bank account, it turns out that you only received £835, due to the day’s exchange rate.

So you need to edit the item in the Bank statement reconciliation process and manually edit the GBP amount

and reconcile the bank account as normal.

ByDesign will then make this additional posting in the GL.

This posting is controlled by the CASH section of the account determination profile.

It is also possible to make this adjustment at the time of payment entry if you know that the bank will be taking a fee for the FOREX transaction.