Top 5 things you need to know about Currency
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Okay, thank you for attending everybody just a few housekeeping rules before we start. All attendees will be on mute and will remain so for the whole webinar. Please use the question box to ask any questions related to the topic and they’ll be answered after the demo. If you run out of time if you a question does need a longer answer we’ll answer that directly offline afterwards. Use the chatbox for any questions related to the webinar. So for example, if you can’t hear us or if the presenter is going too fast. Please note that a link to view the webinar recording will be sent to everybody after the demo.
This is the 25th in a series of our monthly webinars on key areas of NAV or business Central and you can sign up for as many as you like on our website. I’ll show you the list of upcoming webinars at the end. We do also send out regular emails to register for the next one. Okay, my name is Karen and I’ll be facilitating the demo today. I’m an account manager here at T Vision. I’ve worked here for nearly three years and my background is 20 years in software account management working for ERP companies. Ian’s going to be doing the demo today. He’s a support consultant here at TVision and he’s worked here for nearly four years and has been using NAV since 2000.
So the webinar today is how Business Central handles currencies and exchange rates. So whether you purchase or sell internationally, you will need to know how Business Central can incorporate different exchange rates in order to make your processes as straightforward and automated as possible. The key to this really is down to how often you need to update your exchange rates and how many currencies that you trade in.
So the top five things we’re going to show you about preparing for currencies today are: For local and reporting currencies Business Central has these two currencies available for each company that set up. Then updating currency. So you can either update manually the exchange rate or you can link to a website to automate this process. Then we’ll move on to rounding currency. So auto-inserting a line which will add on the additional amount from rounding. Transferring between bank accounts as this will help to automatically record any exchange rate gains and losses. And then we’ll finally go to consolidation which is how to report at group level in the required reporting currency. Okay, so erm before the demo, I would like to understand how difficult you find reporting on foreign currency balances at month end. I’m going to launch a poll now if you wouldn’t mind submitting your answer that would be great. And then we’ll see what the outcome is and move on to the demo.
Guys, I’m just distributing the poll now. If you wouldn’t mind just putting in your answer that would be brilliant. Okay, just wait a little bit longer. Okay, thank you for doing that. We’ll use that information to help with the demo but also afterwards too. Okay, I’ll hand over to Ian now who will be showing you the demo.
Karen can you pass me control? Thank you. Okay, guys, hopefully you can see my screen there. So for today’s demo I am using the latest version of Business Central. We call it version 16 2020 wave one. But everything I’m going to tell you today is valid back to NAV 2016 and 99% of what I’m going to speak about is valid for NAV all the way back to version 4 and 5. So the first thing talking about currencies.
Let’s just quickly go and have a look at some currencies on this system. So I open my currencies list and here we can see a list of all the currencies that I have set up on this demo company. There’s a lot of currencies here and this company that I’m working with is a UK company. So my local currency that I use for all my reporting is GBP pound sterling and you will notice GBP does not appear on this list of currencies. And that is important. You shouldn’t have your local currency appearing in your list of currencies. So if you’re a Euro company, you shouldn’t have Euros here, but you should have GBP. A GBP company doesn’t have GBP, but it does have Euros. So these are a list of all the currencies that we have. But where do we tell the system that we work in sterling and that is done under general ledger setup.
Now fortunately, this is just something that you need to do once right at the beginning and you never need to change. But here we can see I have set up this company to work in GBP and this is the only place on my system the GBP should ever appear. Whenever I capture a transaction and invoice purchase a journal, whatever it might be if it’s in local currency, I leave the currency blank I don’t put anything in. Karen mentioned that there’s two currencies on the system. You saw a list of more than 20 over here. But here’s the first currency that we’re talking about – your local currency. And if we scroll a little bit down you’ll notice there’s an additional reporting currency here in the reporting section and I’ve set this company up. I’m pretending that I’m owned by an American company. Once a month, I need to send them financial reports, but they want to see things in US Dollars.
They don’t want to see these in Sterling. They don’t care about pounds. They only care about the mighty dollar. So because I have a second currency set up that means that every transaction that’s recorded in my general ledger, it is recorded in Pounds Sterling, but it’s also recorded in US Dollars at the same time. So anytime I need to do a report… and let’s just go and have a look at one. Let’s say an account schedule and let’s open up an account schedule.
I’m going to send them my balance sheet for arguments sake. And let’s have an overview of that. You will notice it’s by default it’s showing me the numbers in pounds sterling. So cash is 26,000 and some. If I reported that in US Dollars, it will be considerably more, more than $30,000. But I immediately get this option here just to show this information in my additional currency and we can see that 26,000 has jumped up to 41,000. It’s now reporting in USD others so as quickly as that I can get the numbers in US Dollars.
From here I could Export that to Excel and email it off to my head office do the same thing for my income statement profit and loss assets. Whatever it might be. I can always report in both currencies which makes reporting nice and easy.
So that’s those two currencies, local currency and an additional reporting currency. Plus we have all these other currencies and these are for our vendors and our customers that we might transact with. Now a nice tip. If you only using three or four of these currencies, you don’t need to have them all here. So if you scroll down this list of some really strange ones down here. There’s a western Samoan currency.
If you’re never going to deal with Western Samoa, you can delete these lines just keep it to the currencies that you use. It does make life a little bit simpler, less searching later on. Classic example said I need to do something with Swiss Francs, and I’m you know, go down to the S’s. I can’t find S, now go to the F’s. I can’t find francs.
After lots of searching I find it’s a CHF if I’d only had three or four currencies here, it would have been very easy to find the Swiss Francs currency and have a look at that. So try and keep this list as simple as you can there’s a lot of information about each currency. Very importantly there’s the current exchange rate that my system is using when I post transactions in one of these foreign currencies.
Let’s have a look at the Euro since that’s probably the most common one. And from here I can go to exchange rates and I can get the history of the exchange rates going back into the past. On these particular dates, these were the exchange rates that were being used and I’ve set this up a little bit funny on purpose just to show you that there’s more than one way you can set up your exchange rates.
So this line here, this is probably what everyone’s used to. So I’m saying that one Euro gets me 0.6458 pounds you could do it the other way around and say one pound is equivalent to 1.54 Euros. So whichever method makes more sense to you, you’re quite welcome to use the one that makes the most sense and as you can see up here, you’re not limited to saying how much it is for one. Up here, I’m saying 100 euros gets me 87 pounds point oh seven two one or 7.21 Pence. So I’m not limited to saying for one pound or for one Euro, I can do it in multiples. Especially if you’ve got those very strong or very weak currencies that you need lots more decimal places something like an Omani, I think it’s in a rial in Oman where they go to three decimal places their currency is so strong. Or Zimbabwean dollars where you might want to record in lots of decimal places because the exchange change rate is so ludicrously big. So you can mix and match and choose the one that you want. Now to update these exchange rates. Let’s say it’s the first of the month and I want to put in the new exchange rate for the month going forward. It’s a simple matter of I put in the starting date and I put in what is the exchange rate and I copy that across to my adjustment exchange rates as well. I like to keep them the same so any adjustments tie in with my current exchange rate. It’s that simple to update an exchange rate. So if you’re the type of company that you’re only really dealing in two or three foreign currencies and 99% of your business is in Pounds Sterling, you’re probably happy to update these once a month and that’s enough for you. That’s fantastic. It might be that you’re on the other end of the spectrum and you’re dealing in 20 or 30 different currencies and you need to update them every day because you’re doing dozens of transactions every day. Now you can imagine for someone to come in every day and adjust the exchange rates for all of these currencies – that’s going to be a big job. It’s going to take them half an hour an hour everyday just to update exchange rates. If you’re in that position, you might be interested in using an automatic conversion system using a web service.
And Business Central all the way back to NAV 2016 have this functionality built in. Older versions don’t necessarily have this, but there is an exchange rate service. Let’s go and look and see on this system. I do not have one set up. To set up a new exchange rate service it’s simply click new and in typical NAV BC fashion, I need to give it a code, a description and say whether it’s enabled and then here’s the important bit.
I have to give it the URL the web address of where it is going to get the information for these exchange rates. I put in some information about who’s the service provider and the terms of service and then here’s the meaty bit at the bottom. This web service that I would put up here, it’s going to provide a lot of fields that say what the exchange rates are. This is where I map them on to business Central. So whatever their caption is. Sorry, what our caption is what they call it if there’s a default value and if there is a Formula or a rule on how you convert from one to the other. So within NAV, this might be the relational currency. They may call it the target currency or something. That’s what might be coming through from here. So you would map these things so that NAV can understand that web service. With these web services, some of them are free, which is really nice. But you get what you pay for. So those free services you cannot be guaranteed of business continuity. You can’t be guaranteed of accuracy.
When this first came out yahoo.com, they offered a website where you could get exchange rates. I set up a company, every hour it updated the exchange rates and it was fantastic until one day Yahoo just took that service away. They’re under no obligation to continue. Nobody was paying them for it. But if my business had been using it and depending on it, I would have been in a really hard place.
So if you do want to use this, I would suggest finding a paid-for service. There are financial institutions in the UK that can provide the service for you. They will give you the URL. They will give you their table structure so that you can do the mapping and if you do want to do this, I would recommend, you know reach out to one of our Consultants they will help you get this set up. But again it comes down to, is it really worth doing this if you’re only updating one or two currencies once a month?
Is it worth paying someone to do this automatically, or should it just be you know, five minutes of work once a month for somebody to update two or three exchange rates. That decision is obviously yours. One of the things that you should do after you have changed an exchange rate, you have old transactions in your system that were recorded at a previous exchange rate. You should go and run a job called adjust exchange rates and let me bring that up for you. Adjust exchange rates.
And we can have a starting date and an ending date. That’s usually the beginning of the financial year until today, leave a description, put your posting date, and document it, and this will automatically update all of your bank accounts that are in foreign currencies so that the general ledger is updated to use the latest exchange rate.
You can also choose whether you want to update your customers and vendors, or not as the case may be. I would recommend updating your customers and vendors. And also if you have a second additional reporting currency, do you want to update that as well? So if you do use a reporting currency, I would recommend turning that on. If you don’t obviously leave it off. You can filter just update for the one currency look for euros and just update that, or leave it blank and update everything. Say okay and that job is going to go any open transaction that were at a different exchange rate, it will revalue them and update the general ledger so that it’s a more accurate reflection of what’s expected to come in and go out of the business. You’ll also notice on this currencies page, there are some general ledger accounts here. So we’ve got a realised gains account, a realised losses account. You can have unrealised gains and losses accounts as well.
I’m using all the same account for all of my gains and losses. You can set up separate accounts for every currency separate accounts for gains, separate accounts for losses. You can mix and match whatever suits your business requirements, and further along there are also columns for rounding debit and rounding credit. I’ve left them blank on this company because I’m not really posting many transactions, but if I was with Foreign currency transactions, there’s always an element of rounding off. You saw those exchange rates were two, three, four decimal places, five decimal places in some cases.
So you capture something and sometimes there’s a rounding error when you’ve captured six lines of an invoice each one was off by a fraction of a penny when you get to the bottom of the journal or something, the journals out of balance by a few pennies. If you put in these accounts here, you can automatically on your Journal insert those lines and I will show you where that is in a few moments. But it is really important to get as much of this setup done as you can. Quite simply for the reason that if you don’t have it set up one of your end-users tries to post a transaction and they get a horrible error message that says “there is no conv LCY rounding debit account in currency set up Euro blah blah blah” and they don’t understand what’s gone wrong, and it’s frustrating for them. If you have these populated the system just deals with those roundings. It knows where to put them. Your end users just post and from their point of view everything seamless and it just works right? I’m going to stop looking at the currencies now.
One of the things when you have multiple currencies, so you’re dealing with Europe, the USA, possibly some other countries as well. You probably have bank accounts in those currencies so that you can receive and make payments easier. So on this system if we’re going to have a look at our bank account, so I have set up one US Dollar bank account.
So those are my two accounts which are in Sterling if you look at the setup for either of these two in here you will not see any currencies mentioned at all. Whereas if we go and have a look at the US dollar account somewhere in here – if I can remember where – there we go, I’ve told it this is in US Dollars. So once again, even for your bank accounts, you never put in that they’re GBP. You just leave that blank. This US dollar bank account at the moment, sorry I shouldn’t have closed that. It has a zero balance. There have been no transactions against this account. I want to put some money in this account.
I’m going to transfer some money from my own account into this account. Let’s say $1,000. Now, there are a number of ways that you can do this. You could use a general journal to move money from one bank account to another bank account. If you’re comfortable doing that that’s fantastic. You could also use a payment journal or a cash receipt Journal so you can go to your checking account and say do a payment journal into my US dollar account or go to US dollar account and say do a cash receipt journal from my checking account.
So my example I said a thousand dollars. Let’s move a thousand dollars from checking to US Dollars and I’m going to use a payment journal as I say, whichever one you’re more comfortable with by all means use that.
So I go to my payment journals. I have chosen my general batch. I could choose a more appropriate batch if I wished, I might have a USDA account or an Ian batch perhaps which is for my exclusive use. Choose the one that makes sense for me and then it’s a payment. I can put in all the required information, but it’s a payment to not to a vendor a payment to a bank account. Which bank account am I paying to? To my US dollar bank account? Put in my payment method Etc. And here I say I want to transfer $1,000. I’ve already put that in.
And the system will go and figure out using the current exchange rate that is £652.12. So this is the amount that will be posted to the bank account 1,000 US Dollars. This is the amount that will be posted to the general ledger. So ones in pounds ones in dollars. If the bank tell me they’re sending that and they’re actually going to take 660 pounds out of my account, I can over type. Whoops, not 6600, 660 and that will override the exchange rate and use the actual exchange rate that the bank used. If you have that information by all means put it in to make reporting easier and where am I paying from, I’m paying from a bank account. It’s my checking bank account. This all balances. I can simply go up and post if I wish.
Now it may be that I’m doing more than one transaction here and with all these conversions from one currency to another they may be small rounding differences. And I might find that this goes out of balance at the bottom by a few pence. I’ve got a couple of choices. I can manually insert a line to say what to do with those two or three pennies which general ledger account to put them into. But if I’d done the setup on my currencies table, I do get the option of insert the rounding line automatically. Then the system will automatically insert the necessary line down here to post those pennies to the correct general ledger account for me. Everything will balance, I will be able to post. So once again that setup is important, and to get money from one account to another really simple.
I like to use a payment journal. If you’re more comfortable on a cash receipt journal or a general journal, just use a journal where the two sides are bank account and bank account and you say which account is going to which account. The last thing I need to mention is consolidation. So I mentioned that my company is owned by a US company. So I’m report in US dollars. I might also have a subsidiary that’s in France for example, and another one that’s in the UK, and another one in Northern Ireland, which is also part of the UK.
I can consolidate these three companies up into this company. When I’m doing consolidation one of them’s in a foreign currency. So let’s go and have a look at my business units. Whoops. This is…. Oh my keyboard….. business units. I haven’t set up my subsidiaries yet. Let me set one up very quickly. When I set up my subsidiary, give it its code name and everything, and I have to tell it… if it’s in a foreign currency, which exchange rate should it use? Should it use my local exchange rate to convert from Euros to pounds, or should it use the French company’s exchange rate to convert from Euros to pounds? Whichever one I feel is going be the most accurate and I also get an option over here, what is the data source for that currency?
It could be their local currency. So take the Euros that they have. Use this rule to convert it to pounds or if they have set up an additional reporting currency of pound sterling you can say bring it back in pounds sterling in which case no conversion is necessary. So they could be transacting in euros, reporting in pounds sterling, doing a consolidation which comes through into my head office company in pound sterling, which I can then report in US Dollars to my owners over in the states. The system handles all of that for us quite nicely. Just a couple of other interesting things to bear in mind on your chart of accounts. So very quickly get to my chart of accounts. I have somewhere control accounts for my bank account switch on this case or, not there. They’re down here.
It’s the savings account and the checking account. This is not the same as the bank account. The bank account is in its currency, might be in US Dollars or South African Rands. This is always in pounds sterling and I should never be posting transactions to these two accounts. So the point that on the set up I should disable direct posting to this account to make sure that every transaction is pushed through the bank and no one can post here directly. So let me turn that off. So for all of your control accounts, please turn off direct posting. Stop people making the mistake of posting to the GL when they should be posting to the bank account. That’s pretty much all I have for you.
So we spoke about the local and the additional currency. We spoke about manual versus automatic updating, rounding errors and how you can set up to handle those little easier. Transferring between Banks, consolidation, foreign currencies…. and a little tip there at the end on your chart of accounts for those control accounts.
Karen have any questions come through? So if anybody has any questions about what they’ve seen or something that they haven’t seen about currencies if you want to submit them now. We’ve had a couple in, so one of them Ian is can I link exchange rates myself from a website? Yeah, so that exchange rate service that I showed you. Let me just open it up again. It’s always nicer when you can look at something. Exchange…. let me try again.
Currency exchange rate Services. You can set this up yourself. You can put in the URL. You can put in those mapping rules, etc. It is something that you can do. But if you do get stuck, please ask our Consultants there have done this before, but it’s not something that’s impossible. If you can read through your suppliers documentation on how to map the fields you should be able to do it yourself.
Anything else Karen? Just one more. Can we have a different bank account displayed on the invoices for foreign transactions?
Okay, so I’m guessing on that one. So if I send an invoice to a customer in say Canada and they’re going to pay me in Canadian dollars. I might have a bank account in the UK and Canadian dollars. Yeah. So on your general ledger setup, you generally set up one bank account to receive payments. And that’s the bank account that gets printed on your invoices. What we have done for quite a few of our clients. it’s a very small change that we’ve made. Against each currency in the currencies table, we’ve said this is the bank account that goes with this currency and every time an invoice or a credit note is printed it prints the bank account against the currency rather than the bank account that’s set up for the company in general. If that answers the question – fantastic. If not, drop me a line afterwards and I’ll explain in a little more detail. Anything else Karen?
No, that’s it now, so I’m just going to make myself presenter again and show my screen. Yep over to you. Okay, great. Okay, so just to finish off, I’m going to leave you with the key takeaways that we would like to leave you with for currencies.
So first of all, Exchange rates. So I’m just going to get to the slide. There we go. Exchange rates and managing currency should be part of your month endy procedure. If you schedule the update before running your standard monthly report, then you can be confident that the amounts will be correct beforehand rather than having to do any kind of last-minute changes. It’s ideal if somebody can own the task of updating the exchange rates. If too many people are updating the rates from different websites at different times then this could lead to inconsistent figures. It should ideally be the job of one person to do the update at a set time every month using the rates from one source. Ian’s talked about this part quite a lot – manual versus auto update of currencies. Is it worth it? It may sound good to have an automatic update from a website, but remember there’s normally subscription costs and you will need to do that integration step with NAV or Business Central.
Both of these could cost more than the time it takes for somebody to manually do the update. So it really does depend on the amount of currencies you have in the update frequencies. As Ian said at the end, please don’t confuse the balance on the bank account with a balance on the GL. The balance on the GL is in the local currency, but the balance on the bank account – it’s in its own currency. And then finally, if a transaction is in the local currency, you do need to leave that currency field blank. Otherwise NAV or Business Central will try to look for an exchange rate and it will send back an error if there isn’t one.
Okay. So we hope you found this webinar interesting and informative. As mentioned, this is the 25th in the series of webinars, and we’re going to be continuing the series throughout the year. So if any of these look of interest feel free to register for them.
Okay. Thank you for attending, when I close this session a survey will appear if you like to put any feedback that be great. If you do have any further questions, please email them to Ian and I at email@example.com – thank you very much.