This article explains how foreign currency sales are handled when multi-currency is switched on.
Sales orders and credits are always created in the customer currency and all items then added to the order will be priced in that currency.
Warning: Even if the price list used on the order indicates a different currency, the order currency always takes precedence.
Note that if an item is added from a price list of a different currency the price will not be converted - the currency is simply switched. For example, if, when creating a USD order, a product is added using a Euros price list where it is priced at EUR10.00, the product will then be sold for USD10.00.
The currency of the order or credit is used for all of the following:
- Customer account balance
- Invoice and payment accounting (both foreign transaction and base values)
The currency of the order is not applicable when handling stock. All inventory costs associated with the order are managed in base currency.
Changing the currency of an order
It is not possible to change the currency of an order after it has been created.
However, the customer currency can be changed and then a new order created in the desired currency. It is fine for a single customer account to have orders and invoices in multiple different currencies - the customer currency will just have to be changed every time an order needs to be raised in a new currency.
Cost tab and profit-at-a-glance for a foreign currency order
The cost tab on an order provides an at-a-glance view of the profit for the sale. These same figures are used for the profit-at-a-glance summary on the sales list and the revenue and cost values on the sales analysis reports.
When processing foreign currency sales, the cost tab will always provide the analysis figures in your base currency.
- The unit cost is taken from the cost price list set on the order, up until the order is shipped; on shipping, it updates to the actual price of the unit sold, using the first-in first-out (FIFO) method of valuation
- The total cost is the cost price list value multiplied by the quantity
- The total price is the total sell amount on the order row converted using the order exchange rate
Exchange rates on sales orders, invoices and payments
The order exchange rate is used to provide an estimate of the total base currency value, but it is not necessarily the final rate that will be used for the invoice or payments, which depend on various rules and settings.
Sales order exchange rate
When a foreign currency sales order is created it will be assigned the system exchange rate for the order tax date, which will usually be the day the order is added unless it is set by an app submitting the order.
Manually changing the tax date on an order doesn't cause the exchange to change, but the rate can be manually edited to recalculate the estimated base value of the order.
Fixing an exchange rate
The exchange rate on each sales order can be marked as fixed or not fixed.
When manually adding orders, the rate defaults to not fixed, but for downloaded orders the rate will default to fixed.
The option can easily be changed using the "Fix" checkbox next to the exchange rate within each order. It is not possible to edit this in batch.
It is important to understand what the difference is between a fixed and not fixed exchange rate and the effect it will have on the final invoice and any payments that are processed against the order.
In summary, fixing a rate means the rate seen on the order is used for both invoice and payments, and a not fixed rate will be set by the system for the invoice and payments:
- When an exchange rate is fixed, the rate is locked into the order.
This same rate will be used for the invoice and all payments processed against the order. Since the same rate is used no exchange rate gains or losses will be produced as a result of these transactions.
Downloaded orders default to use a fixed rate since the order and payment are usually processed on the same date and therefore would have the same rate with no gains or losses recognized, regardless of the timing of them downloading into Brightpearl.
- When an exchange rate is not fixed, the rate used for the invoice will be the system rate applicable for the invoice tax date (note that accounting settings control whether this date is updated on invoicing).
This means that the order rate will be overwritten at the time of invoicing. In addition, any payments processed against the order will also use the system exchange rate applicable for the payment date, unless manually edited.
Since different exchange rates can therefore be applied to the invoice and payments, it is likely that exchange rate gains and losses will be recognized for these orders.
This will usually be the case when invoicing a customer but receiving a payment later, since exchange rates will change over time.
If you are unsure as to whether you should be changing the fixed exchange rate option on an order, you should check with your accountant.
Sales invoice exchange rate
When a sales order is invoiced, the exchange rate used depends on whether the order rate is fixed or not fixed:
- If the exchange rate is fixed, the rate seen on the order will be used for the invoice. Unless the rate has been manually entered, the rate will usually be the the rate from the date the order was created. See the 'sales order exchange rate' section above.
- If the exchange rate is not fixed, the system exchange rate for the invoice tax date will be used.
The invoice tax date used depends on an accounting setting "Use today's date as invoice date" found at Settings > Company > Accounting: Options. If this is set to yes, the order tax date will be overwritten with today's date and therefore the exchange rate for today will be used. If this is set to no, then the tax date won’t be updated - the order tax date will be used and the exchange rate from that date, which may be a past date.
Payment exchange rate
Payments are always processed in the order currency.
The exchange rate used to convert the payment to base currency depends on whether the order rate is fixed or not fixed:
- If the exchange rate is fixed, the rate seen on the order will also be used for the payment.
- If the exchange rate is not fixed, the system exchange rate for the payment date will be used by default, but this can also be manually entered is required.