Foreign currency processing
Sage 200 works in multiple currencies. You can enter foreign currency receipts and payments via the Cash Book, Sales Ledger and Purchase Ledger, although the Nominal Ledger will always reflect your base currency.
Trading in foreign currencies is simple provided you follow the guidelines below.
The balance and turnover of all foreign currency accounts is maintained in the appropriate ledger for both the operating currency and the base currency equivalent.
Note: Once you set up an operating currency and begin posting transactions, you cannot change to a different currency.
Where possible, it is best to conduct monetary transactions in the same currency as the trader, to avoid conversion charges. However, if not, you can enter all of the information required to conduct business using different currencies.
The system assumes that payments and receipts are recorded in the trader's operating currency. If you are not using foreign revaluation in the Sales/Purchase ledgers, you will be able to enter any exchange difference on the transaction. Otherwise, this is calculated by the system.
- Select the bank account to be used for the transaction. This is either in base or foreign currency.
- Enter the cash value.
- Select the currency. This may be different to the bank account currency. To avoid charges for converting the money, it is best to use the same currency where possible.
- Enter a Settlement Discount if applicable.
- Amend the exchange rate if required.
- If neither the bank or cheque currency are base currency The operating currency used by your company and the Nominal Ledger; other currencies are regarded as foreign., then currency triangulation has to take place to calculate the value of the transaction.
- You may need to enter an exchange difference Exchange differences are the gains or losses made on the transaction due to changes in foreign currency exchange rates. These exchange differences are posted to the Nominal Ledger Exchange Differences account., depending on the settings for your Sales or Purchase Ledger for Use foreign account revaluation. This will happen if the exchange rate changes between the time that you received the payment to the time that the transaction was posted.
- Enter any charges incurred as a result of the currency conversion, in the bank currency.
This rate will be used when calculating profit and loss on revalued transactions.
Note: The foreign exchange rate table will not be updated by changing the rate here. If you want to change the rate, you must do so in Accounting System Manager.
You must also enter or confirm the default nominal codes for the bank charges account. These are specified in the Nominal Default Accounts table in the Nominal Ledger.
The calculated total bank cheque value is shown (the bank's currency equivalent of the entered cheque amount, converted using the transaction exchange rate, less any entered charges).
Note: If you want bank charges to be included in your VAT return, then don't enter your bank charges here. Instead, you should enter the bank charges as a separate Nominal Vatable Payment or Nominal Vatable Receipt, using the appropriate VAT rate.
The following examples show the different scenarios that can arise when dealing with transactions that do not use your base currency. In these examples the base currency is Sterling:
Choose your Sterling account then the relevant trader account. Enter the value of the receipt in $ (the system will have defaulted to using $). The exchange rate shown is the one between the cheque currency and the bank currency, from the default set up in the exchange rate table, but you can change this if you need to. In our example this is 1.5. At this point Total Bank Cheque Value is £66.67. You have the opportunity to enter any charges incurred for converting the cheque to Sterling, and you enter £3.00, reducing the Total Bank Cheque Value to £63.67. This is the amount that will be added to your bank account. The customer's account will be updated with the $100.
Choose your Sterling account then the relevant trader account. Enter the value of the receipt in £s; you will have to change the currency as it will default to US$. No exchange rate is shown as the cheque and bank account are in the same currency. Also, no charges are required. However the trader's account is in US dollars and the system needs to know by how much to reduce their balance. You must therefore enter the Customer Cheque Value (in $s) yourself, using the exchange rate between the traders account and the value of the cheque. The bank account will be updated with the £200 and the trader's account with the amount you enter in the Customer Cheque Value, possibly $300.
Choose your Sterling account then the relevant trader account. Enter the value of the receipt in euros. Enter the correct exchange rate between the euro and the bank currency. In our example this rate is 1.6 and the Total Bank Cheque Value is calculated at £156.25. The bank account will be updated with the £156.25 and the trader's account with the 250 Euros.
Choose your euro account then the relevant trader account. Enter the value of the receipt in $s; you will have to change the currency. In this case, neither the bank currency nor the cheque currency are the same as your base currency and the exchange rate between these two is not stored in the system. Therefore triangulation If you are using a foreign bank account, but the payment or receipt currency is different to both the bank currency and your base currency; triangulation has to take place, via your base currency, to determine the exchange rate to be used for the transaction. The rate from each currency to the base currency is amalgamated to produce an overall conversion rate that is then used to convert the transaction amount. When a transaction involves a transitional euro currency (a currency that has agreed to move to the euro but has for example three years grace to phase out the country's own currency), then the conversion must always be via the euro. The rate from each currency to the euro will be amalgamated to produce an overall conversion rate that is then used to convert the transaction amount. takes place to find an overall exchange rate to use. In our example the rate is 0.85 giving a total bank cheque value of 235.29 euros. Enter bank charges of 2.50 euros reducing the bank cheque value to 232.79. The bank account will be updated with 232.79 euros. The system needs to know by how much to reduce the traders balance - you must enter the calculated amount in the Customer Cheque Value field (in euros). This amount will reduce the customer's balance.
Choose your dollar account and the relevant trader account. Enter the value of the payment in euros. Triangulation If you are using a foreign bank account, but the payment or receipt currency is different to both the bank currency and your base currency; triangulation has to take place, via your base currency, to determine the exchange rate to be used for the transaction. The rate from each currency to the base currency is amalgamated to produce an overall conversion rate that is then used to convert the transaction amount. When a transaction involves a transitional euro currency (a currency that has agreed to move to the euro but has for example three years grace to phase out the country's own currency), then the conversion must always be via the euro. The rate from each currency to the euro will be amalgamated to produce an overall conversion rate that is then used to convert the transaction amount. will take place to determine the exchange rate for euro to dollars. In this case the rate is 1.06 and the calculated total bank cheque value is $140.62. You may need to enter bank charges and, if so, these will reduce the value of the cheque that is posted to the bank. The trader's account will be updated with the 150 euros.
As you can see the combination of currencies for the payment or receipt, the trader's operating currency and the bank's operating currency will require slightly different information to be entered, and some you will have to enter the amount to be posted to the trading account yourself, as the system is unable to determine this.
Note: If the transaction involves a payment rather than a receipt then any bank charges enter will be added to the total bank cheque value rather than deducted.