Foreign Exchange Rate
From TrueERP wiki
Overview
Whether you are part of the International Business community or perform your business on a Local or National level it's possible that you will at some point deal with transactions that involve Foreign Currency.
By using the Foreign Exchange Rates window in ERP you are able to define the rates for Purchase and Sales transactions for each Currency and/or Country and also define a Hedging Formula. There is a default list of all major foreign currencies already in ERP and you are able to enter as many more as you wish.
Variation Accounts should be set up to account for any variation in the price between order/invoicing the goods and making/receiving payment.
How To Create a Foreign Exchange Rate
- Firstly, select the'Foreign Exchange Rates List' button from the General tab.
- Select the 'All Rates' radio button to display the list of all Active and Inactive Rates. This will enable you to check if the rate you wish to set up is already in the list whether it is Active or Inactive.
- If the Country you are setting up an Exchange Rate for is listed then double-click on it to load the Foreign Exchange
Rate screen to set the rate, e.g. New Zealand.
Note: This rate is currently not Active.
- Enter the 'Buy' and 'Sell' rate as per the current rate you are using.
- Select the 'Active' tick-box to activate the code.
- Select 'SAVE'.
Exchange Rate Note:
In ERP we record two foreign exchange rates, a buy rate and a sell rate these are used as follows:
Sell Rate - This is the rate that the bank will "sell" a foreign currency to us. This is used in foreign purchase orders as we have to buy the currency from the bank to pay the foreign supplier.
Buy Rate - This is the rate that the bank will "buy" a foreign currency from us. This is used in foreign sales as we have to sell the foreign currency we have been paid in to the bank.
To create a Foreign Exchange Rate that is not already in the Exchange Rate List, follow the steps below:
- Select the 'Foreign Exchange Rate' button from the General tab.
- Enter the name of the Country/s in the 'Country' field that the Currency and Rate for, e.g. 'European Union'.
- Enter the name of the Currency in the 'Currency' field.
- Enter the code for the Currency in the 'Code' field.
- Enter the the 'Buy Rate' (i.e. the Rate the Bank will Buy the foreign currency from you), e.g. 1.5
- Enter the 'Sell Rate' (i.e. the Rate the Bank will 'Sell' a foreign currency to you), e.g. 1.5
Buy and Sell rates are typically different. Check with you Bank as to the current buy and sell rates for the Currency you are creating.
Select the 'Active' tick-box to ensure the Exchange Rate is available to use in your database.
Note: Foreign Exchange Rates can also be created from the Foreign Exchange Rate List by selecting the 'New' button.
- Select 'SAVE' to save and exit the new Currency set-up.
- Select 'NEW' to automatically save the Currency you have just created, and load a new foreign exchange rate entry screen.
