Although correct in accounting terms, applying a single currency policy in an accounting system imposes limitations on its functionality. For example, how would the system generate an automated payment in the original currency of an invoice, when it’s not the local currency?
So when processing foreign currency transactions you need multi-currency accounting software. This should:
- Conform to SSAP 20 (or its equivalent),
- Enable transactions to be posted to the ledger in any currency,
- Translate posted journal amounts into your required local, reporting and/or base currency,
- Provide a default exchange rate for the period,
- Let you enter and use your own spot rate when appropriate.
Furthermore, your multi-currency accounting software should simultaneously generate a payment journal and an automatic electronic payment for an invoice, in its original currency. The payment journal should post to ledger in the original currency. It should also be translated into your local currency, and any other reporting currency required.
During reconciliation, you might find currency variances between the system bank account and the physical bank account. The system must be able to generate automatic journals to correct this.
When dealing with multiple currencies in a system, if you trade in several countries, you might be maintaining a lot of conversion rates. Whether they be either daily, monthly or period-specific, ideally you want the functionality to upload them automatically.
Ultimately you need be able to report in a single currency, regardless of the original transaction currency. You may also need to revalue certain account or asset balances to reflect exchange rate movements and calculate any unrealised gain/losses.
Choosing multi-currency accounting software
Choosing multi-currency accounting software can be a time consuming and frustrating exercise. There is an overload of information (and misinformation) available to you. Many systems claim to me able to handle full multi-currency functionality but on closer inspection the processing is somewhat limited. In our opinion, the following features are essential:
- Ability to process transactions in any currency.
- Facility to automatically maintain conversion rates for any date or period.
- Capability to pay an invoice in the original currency and automate the cross-border payment.
- Be able to process a receipt in a currency different to the original invoice and account for the gain/loss.
- Maintain and reconcile bank accounts in various currencies.
- Hold multiple currencies on a single transaction to reflect any base, reporting or functional currency requirements.
- Produce reports, including a trial balance, at any currency level required (base, reporting, etc.)
- Specify a fixed currency per account, so only that currency can be posted to that account.
- Set the system to restrict currency rate overrides, or limit them within certain tolerances.
- Consolidation across companies at any currency level.
- Ability to revalue any combination of accounts, currency codes and transactions.
- Create revaluation profiles, to save specific revaluation setups.
- Adhere to international accounting standards and localised requirements.
- Enable companies to integrate and streamline local and multinational financial resource management processes, from end to end.
- Provide a real-time view of financial performance across the entire enterprise, thereby enabling users to make quick, effective decisions.
- Have the reliability, flexibility and control necessary for adapting to the demands of even the most challenging business environment.
Recommendations
Our personal preference is for the accounting software that was originally designed specifically for a multi-currency, multi-language environment, namely SunSystems. With over 9,000 customers in more than 190 countries, SunSystems certainly has the pedigree necessary to provide a comprehensive multi-currency accounting software solution for all organisations.
If you want to talk to a SunSystems expert about investing in multi-currency accounting software for your organisation, click the following link FinanSys.co.uk and visit their website.