Add Currency Values to Balance Sheet Export

#1

Hello all,

I wonder if anyone can assist. My company is based in the EU, so uses EUR as its base currency, however we operate mainly in other currencies (GBP and USD). My question is regarding currency movements on the balance sheet, and if there’s a way to export the movements in their original currencies along with their base currency values.

Perhaps easier if I give an example:

I accrue UK GBP wages in March (for work completed in March) via a GBP journal entry, but don’t pay them until April. The April GBP bank movements are booked against the balance sheet accruals, however as we use monthly exchange rates, there is a currency exposure, and a slight EUR gain or loss depending on how the rates move. This is calculated manually every month by exporting the account to excel, then filtering to find the necessary values and summing to find the difference, then making journal entries to balance the account against fx gains or losses.

That’s all fine, but what would be very useful would be the option to export both the EUR value of each entry AND the original currency value, to be able to ensure that all the liability has been paid in its original currency, and I’m not accidentally booking away differences that aren’t actually fx (e.g. if we’ve accidentally underpaid someone).

Is there an easy way to do this?

Many thanks,
Rob

#2

Why are you accruing wages with journal entries? Why don’t you denominate your employees in the currencies in which they will be paid? Then enter payslips, which do not record payments to employees, but rather the accrual of amounts to be paid.

As for exporting balance sheet figures in foreign currencies, that is not possible. The balance sheet must be all in your base currency. Otherwise, it cannot be kept in balance.

#3

Ok, wages were a bad example. Our business works that way - freelancers doing jobs are treated as Cost of Sale, not General Expenses or Employee Costs etc. Plus amounts and personnel vary wildly, so treating them as employees would be more work that it’s worth… Pick any other accrued currency cost of sale instead, same principal applies.

I’m happy for the balance sheet to be kept in base currency, but as the entries were made in another currency, then converted to base to appear on the balance sheet, so surely that information is still accesible somewhere?

#4

You first mentioned wages, which implies employees. If you are using freelancers, they should be treated as suppliers, who can also be denominated in foreign currencies. They should be providing you sales invoices, or some equivalent, which you enter as purchase invoices. Those purchase invoices will be in the foreign currency and have the effect of accruing the subcontract expense. Then you can pay the Accounts payable balance in the appropriate foreign currency.

You can keep track of your freelancer activity using Supplier Statements.

#5

Hmmm, the problem isn’t with the real bookings though - if that were the case, I’d book the bank movements directly against the P&L account. The issue is the accruals.

Invoices from the suppliers don’t arrive until the month after they should appear in P&L, so I’d still need to book an accrual for the invoice to be received. The following month, I’d book supplier invoices against “Invoices to be Received” and we have the same problem - we can’t just reverse the whole booking at the start of the month like a Work In Progress accrual, as you can’t trust the supplier invoices to be complete or correct.

Presently, I use an excel formula to convert back based on the description field of the accrual booking (i.e. a text string that ends in the currency code for the original booking), so if it’s not possible to extract that information from Manager, then I’ll keep doing it that way.

#6

Now we are delving far beyond the workings of Manager. But let me express my opinion (only an opinion) that you are making more of this than necessary. I think it unusual to accrue a future obligation to pay a supplier who has not yet presented an invoice. Why should you record an expense for which there has been no demand for payment? This would be like recording an expense because you have issued a purchase order.

One of the advantages of using subcontractors is that you are not investing your resources in providing a service, the subcontractor is investing its own. The liability comes to you only with the invoice.

As a result of your practices, you are encountering foreign exchange issues on transactions that have not occurred and never will. I can’t begin to suggest how to avoid them.

#7

Sorry to contradict you @Tut but under a legal point of view the liability comes when the contract says that and not when you receive the invoice which is only a fiscal document. That’s the same issue we were talking about in the “Pro-Forma” topic.

1 Like
#8

I agree with you, @Davide. But for @generalche to be able to enter any form of accrual for subcontract work, there must be knowledge of the work performed. If there is a governing contract that imposes the liability prior to a formal invoice, I would contend the exchange of information necessary for the accrual is legally equivalent to a progress invoice. So a purchase invoice could still be entered, based on the same information now being used for the accrual journal entries. This would be like a self-generated or customer-generated invoice.

I still don’t like the idea of entering liabilities for prospective expenses. Consider an extreme example: You contract with a subcontractor for service work, agreeing to pay on an hourly basis for 400 hours of labor over the coming 6 months. (This sounds somewhat like @generalche’s situation.) Are you instantly liable for 400 hours’ worth of labor? No. You may become liable later, after some of the work is performed and you know about the performance. And if that subcontractor has agreements for periodic delivery of products needed to complete the work, are you also liable to the subcontractor’s vendor for all the products that will be delivered over the six-month period? Clearly not. Nor are you liable to the supplier of raw materials to the vendor who manufactures the products for delivery to your subcontractor.

Your liability has to stop at the boundary of your company. Some definite act is required before the subcontractor’s investment of labor becomes your liability. If the subcontractor’s labor automatically becomes your liability, the subcontractor is really an employee. There is no arm’s-length relationship. The invoice makes that connection; and an invoice can take many forms.

#9

This is correct. Under most GAAPs (that I am familiar with), and IFRS, liabilities should be recognised as soon as they occur, so if a business has a liability to pay its subcontractors, then that liability should be recognised in the financial records:

https://www.iasplus.com/en/standards/ias/ias37

Equally, in agreement with @Tut’s comment, liabilities are recognised as they occur, meaning by whatever time period you would normally subdivide your reporting, you should report current liabilities. I.e. you wouldn’t book 6 months of subcontracted labour at the beginning of the project, rather, each month (if you report monthly) you would book that month’s costs, along with that month’s expected revenue, even if you are not expecting to either receive your subcontractor’s real invoice or issue your own invoice to your client until the end of the project. This is the basis of accrual accounting (such as I’ve had it explained to me).

In my particular case, my revenue for March labour is recognised in March (either through invoices themselves or Work in Progress accruals), meaning that if the corresponding Cost of Sale isn’t correctly recognised, then gross margin cannot be correctly calculated or reported.

And this would make everyone sad (and me out of a job).

Regarding the problem at hand, I’m looking more closely at the Employees and Payslips tabs, and while the set up is going to take a little while to get everything ready, I think this might be exactly the functionality I’m looking for (apologies for not heeding your first advice, @Tut ); I can create payslips as the liabilities occur, pay them in their individual currencies (a month later), and any unpaid amounts (or over-payments) will remain visible in the correct currency (and, as a bonus, the fx is taken into account automatically as well). The only thing I can’t see that’s obvious is Employer’s National Insurance (or social security) payments. They aren’t really a “Deduction” or an “Employer Contribution”, as they shouldn’t be classified as gross pay for the employee, so I guess they will need to be booked via a journal entry, unless I’m missing something obvious?

Many thanks,

#10

I am, indeed, missing the obvious. They are an Employer Contribution, despite not being classified as gross pay.