This topic provides an overview of the foreign currency functionality in Costpoint. It discusses:
Specific billing capabilities
Setup of a foreign currency invoice
Processing and printing of foreign currency invoices
Working with accounts receivable and cash receipts for invoices that were issued in a foreign currency
Examples of the issues encountered when working with foreign currency invoices are shown.
Multicurrency features are available in the Costpoint General Ledger, Accounts Receivable, Accounts Payable, Purchasing, Billing, Inter-company Work Orders, Consolidations, Sales Order Entry, and Cash Management modules. The Import Accounts Payable Multicurrency Vouchers screen contains multicurrency functionality, and Costpoint Multicurrency can calculate realized and unrealized gains or losses. This topic focuses on the billing and cash receipts capabilities.
If you plan to use the multicurrency features of Costpoint, you must first establish a functional currency on the Configure General Ledger Settings screen. This is a system-wide selection. The functional currency is the currency in which the books and records (General Ledger) of your company are kept and is usually the currency of the country in which your company is located.
The transaction currency is the currency in which the invoice is issued or the voucher processed. Certain programs in Costpoint Billing and Accounts Payable convert the transactional currency back to the functional currency when you enter the voucher or process the bill. All functional and transaction currencies and their associated conversion rates are stored in the history tables. Costpoint uses these amounts and rates to calculate the unrealized gains and losses at the end of the accounting period and the realized gains and losses when the voucher is paid or the cash receipt is entered.
In Costpoint, you can also create the invoice in one currency and pay it in another currency. This is a common occurrence when dealing with the Euro. The currency in which the invoice is paid is the pay currency. You enter the pay currency when entering the cash receipt or selecting the voucher for payment. Use the Exchange Rates subtask of the Manage Cash Receipts screen for pay currency selection in Accounts Receivable and use the Select Pay Currency group box on the Select Vouchers for Payment screen for pay currency selection in Accounts Payable. For example, the XYZ Company keeps its financial records in US dollars (functional currency). This company is doing business with a British company that wants to be billed in British Pounds (transactional currency). However, because the work on the project is being conducted in France, the invoice is paid in French Francs (pay currency).
If you use a pay currency, you must use a process called triangulation, where the transaction currency and the pay currency are converted back to functional currency to calculate the realized gain or loss on the transaction. You can enable the use of triangulation on the Configure Multicurrency Settings screen. Usually, the pay currency is not known at the time of bill calculation or voucher entry. Therefore, you enter the pay currency when receiving the cash or selecting the voucher for payment. You can establish a default pay currency in the Manage Vendors screen. You can also limit which pay currencies are allowed for a particular vendor.
As the first step in Multicurrency processing, you must establish and format your currency codes in Costpoint Multicurrency. You cannot use a currency as a functional, transaction, or pay currency until you have established it in Costpoint Multicurrency. Costpoint contains pre-defined currencies, but you must review the time, date, currency, and number formats on the Manage Currencies screen before using a particular currency. Currency codes follow the International Standards Organization (ISO).
You convert one currency to another by using Exchange Rates. After setting up the currencies, you must initialize the exchange rate groups and sources to establish conversion rates. Costpoint uses the rate source to identify the source of the exchange rates. Examples of rate sources are the Wall Street Journal, a bank, or a variety of other online sources. Use the Import Daily Exchange Rates utility to assist with online rate sources.
On the Manage Exchange Rate Groups screen, set up To and From currencies and then associate them with an exchange rate. Once you have entered the exchange rate for the To and From currencies, Costpoint creates a new line that contains the inverse of the line that was entered. Costpoint reverses the From and To currencies and establishes an inverse rate so that an exchange rate for the two currencies is available whether transactions are being converted to or from the functional currency.
Set up all currencies that are being used as a pay or transaction currency on the Manage Exchange Rate Groups screen with the functional currency. Since an inverse line is automatically created, it does not matter whether the functional currency is the From or the To currency. Costpoint cannot compute triangulation accurately if this is not completed. Costpoint uses triangulation only if no direct rate is available. To enable triangulation in Costpoint, select the Use triangulation to find a rate check box on the Configure Multicurrency Settings screen. If you do not wish to use triangulation, leave this check box cleared. However, you get a "zero" conversion rate if you have not established a direct rate between two currencies on the Manage Exchange Rate Groups screen.
Costpoint calculates realized gains and losses when cash is received for the invoice or when the voucher is paid. It calculates the gain or loss by comparing the functional currency amount that was calculated when the invoice was created to the functional currency at the time that the invoice was paid. The difference between these two amounts is the realized gain or loss on the transaction.
Optionally, you can also have Costpoint calculate unrealized gains and losses at the end of any accounting period. Currently, Costpoint can calculate unrealized losses only on open payables and receivables. Costpoint compares the functional currency that was calculated when the invoice was created or the voucher was posted to the functional currency at the current exchange rate. The difference is the unrealized gain or loss. The total unrealized gain or loss is posted to the accounts that you have identified as unrealized accounts on the Manage Multicurrency Accounts screen. You can have unrealized gains and losses computed using either the inception-to-date method or the net change method. Select the method on the Configure Multicurrency Settings screen. Once cash is received for an outstanding invoice or payment is made on a voucher, the gain or loss becomes a realized one. When the realized gains or loss is computed, Costpoint reverses all unrealized gains or losses that have been recorded for that transaction. To allow for this reversal, it stores the unrealized gain or loss amount in the accounts receivable and accounts payable history tables.
Multicurrency invoices can be calculated, printed, and posted for standard bills, customer product bills, project product bills, and milestone bills. Identify the transaction currency needed on an invoice on the Manage Project Billing Information screen or one of the edit screens. The default transaction currency from the Configure Multicurrency Settings screen is the default in all Costpoint Billing screens. You can use any currency that has been set up on the Manage Currencies screen. You can use any billing formula available on the Manage Project Billing Information screen. You can have billing rates frozen so that the amounts in the transaction currency can be used on the bill, regardless of the exchange rate in effect at the time of bill creation, or you can have the rates converted at the current exchange rates. Value Added Taxes are also available in Costpoint Billing. Set up codes for value added taxes on the Manage Sales or Value Added Taxes screen.
In order to produce an invoice in a currency other than the functional currency, you must set up certain information on the Manage Project Billing Information screen. On the Other Info tab, you must identify the transaction currency in which to bill. The default from the Configure Multicurrency Settings screen displays but can be changed to any currency that has been set up on the Manage Currencies screen. You must also select a rate group in order for the proper conversion to functional to occur. There are two other important selections in this subtask:
Select the Freeze Multicurrency Rate check box to restrict the calculation of unrealized gains and losses at the end of an accounting period. If you select this check box and execute the Update Open Accounts Receivable Exchange Rates process, any receivables related to this project remain unmodified; therefore, no gain or loss is computed or posted on receivables generated by the project.
Select the Use Transactional Currency Billing check box to stop the conversion of billing rates and non-labor costs by the current exchange rates. The billing rates found in the billing rate screens are used in the calculation of the invoice and no rate conversion takes place. The non-labor costs are directly passed through to the invoice with no conversion rates applied.
Set up value-added taxes on the Manage Sales or Value Added Taxes screen. In this screen, you identify the tax accrual account, the tax type (VAT or Sales), the rate, and the recoverable accounts.
Set up tax types on the Manage Tax Types screen. In this screen, you initialize a tax type as recoverable and/or accruable. If a tax is recoverable, you must identify your credit and debit recoverable accounts on the Recoverable Accounts subtask of the Manage Sales or Value Added Taxes screen.
Once you receive the cash for an invoice, you must record it on the Manage Cash Receipts screen. First, you must identify the pay currency on the Exchange Rates subtask. The default is the transaction currency of the invoice. Costpoint calculates the functional currency amount as you enter the cash receipt. After you have reviewed the cash receipt entry, post it on the Post Cash Receipts screen. When you post, Costpoint records the realized gain or loss using the realized gain or loss accounts on the Manage Multicurrency Accounts screen and reverses any previously recorded unrealized gains or losses.
See the Multicurrency related topics for more information.