I don’t know how other people use Exchange rates but the way that I use it, is as follows.
My base currency is British Pounds and I have 3 or 4 suppliers that I buy from once every couple of months that sell in US Dollars.
Bug:
I have marked the supplier as US Dollars for their currency and when I go to purchase invoice I can put in the US dollars amount. When I make payment, I always have to move the dollar amount to the US dollars field and replace the field where the dollar amount was put with the British Pound amount. So that is one thing that needs to be fixed.
Feature Request:
The second and the bigger problem that I have is that I have to put the exchange rate before the date of payment (using the same day does not work as it calculates starting balance based on previous day exchange rate) and the second headache that I have with it is that I always have to work out the exact exchange rate. For example, my bank statement says $1.4001 to the Pound, but in order to get everything to balance I have to try $1.40011, then $1.40012 then $1.40013 to get the pennies/cents to balance!
Could the program be designed to auto calculate the exchange rate if you put in the Pound and Dollar amount on payment rather than having to fiddle about with the exchange rates setting in settings?
I guess what you saying is this, if I select a GBP bank account and the Supplier is in USD, then the Spend Money should put the Purchase Invoice figure into the USD field instead of the GBP field which makes logic, but I am guessing Manager has a standard process whereas the Purchase Invoice figure just transfers to the Spend Money without regard as to the currency.
Is this a bug or just a lack of sophistication - being currency sensitive.
But you shouldn’t be entering exchange rates for payments at all, that is what the two currency fields within the Spend Money calculates for you automatically.
You enter exchange rates with regards to the Purchase Invoices only.
I am not entering exchange rates for payments specifically. What I mean is that I am only noticing a foreign exchange loss on the summary page after payment! But I think you are right - the purchase invoice date is when you are entering the exchange rate.
I believe that you are correct.However as the payments field sees two currencies, the program coding could be designed to recognise that when there are two currencies on payments form then to autofill the correct fields.
However, it would be easier if I could just put in the dollar amount on the invoice, the british pound amount on the payments and (the US dollar amount is already there) and the program could just calculate the currency.
I don’t understand what the exchange rate profit/loss is to be used for - I think it would make sense for people who buy and sell a lot in multiple currencies, but in my particular case all I want to do is pay a select number of invoices in a foreign currency - the potential profit/loss on the exchange rate beween purchase invoice date and payment date is irrelevant.
And that is correct, the differential between the Purchase Invoice rate and the subsequent payment rate only arises after the payment.
Its to balance the double entry over the transactions.
Lets say you took up the USD 1000 Purchase Invoice as GPB 1200 based on a “nominated” rate.
Then the Bank deduct a payment of GBP 1210 based on the “actual” rate, giving a GBP 10 variance.
That variance is saying that the Purchase Invoice’s “nominated” rate (1200) has been adjusted to the payment’s “actual” rate (1210).
Purchase Invoice - Debit 1200
Spend Money - Credit 1210
So an Exchange - Debit 10
Sorry I am explaining my question very badly badly. You are explaining the technical process behind the exchange loss/profit which I understand - I understand what Manager is doing. My question is why this is relevant to most businesses who are not trading in foreign exchange for profit?
Put another way, what I am asking is what value is it for most people to know that there has been a currency difference of say £1.20 between purchase invoice and payment. Most people like myself are only interested in the amount paid from their bank account not what the exchange rate was worth three days prior to that.
Maybe the question that I am trying to ask is whether foreign exchange gains/loss functionality should be disabled for most businesses like myself whilst still allowing one to set the base currency?
For precisely the reason you mention in your next paragraph. If you enter a purchase invoice at one rate, but are able to pay it at a slightly different rate, the purchase invoice doesn’t change. But you have a small forex gain or loss. If this difference isn’t taken up, your books won’t balance. Remember, those foreign currency amounts, whether in bank accounts or Account payable/receivable, get converted for reporting on the balance sheet.
both you and Brucanna are answering the technical point of how Manager balances the amounts based on the fact that the exchange rate changes hourly. I understand that the dollar amount is worth a different amount on purchase invoice date and payment date. But that’s not the question I am asking. I appreciate that its difficult to understand because its not easy to explain.
What I am trying to say is that perhaps Manager should not be recording the exchange rate at all. Instead of trying to balance the purchase invoice and payment using exchange rates, would it not be simpler to do it like this.
Maybe the program should have an option to autofill the purchase invoice with the base currency amount when you spend money as by that time you will know the exact amount you need to pay in base currency. So to balance you put £100 ($150) on both the purchase invoice and payment forms. Then its balanced.
This would avoid the problem of having to fiddle around with exchange rates such as 1.40011 and 1.40012 and 1.40013 to get the purchase invoice and payment exchange rates to balance properly as my bank account (and I presume most others) only show the exchange rate as 1.4001
The program can’t autofill what it does not know. The purchase invoice was entered in USD; you are paying in GBP. By saying “you will know the exact amount you need to pay in base currency,” you are saying you must effectively know the exchange rate. The supplier, who billed you (in your last example) 150 USD has no idea how many GBP it will take to pay the invoice on the day you actually make the payment. So they can’t update their invoice. The act of entering duplicate currency amounts effectively tells Manager what the exchange rate is. But you have to supply the information. Again, the program cannot autofill unknown information.
There just isn’t any way around the fact: if you deal in multiple currencies, you will inevitably have forex gains/losses, regardless of how exchange rates are entered or calculated.
The only way around that reality is restrict yourself to a single currency. You can do that, even if making actual transactions in foreign currencies, by waiting until transactions clear your bank or credit card before entering them. For example, if you pay your foreign supplier in USD with a credit card, your bank will enter the transaction in GBP (presuming your card account is denominated in GBP) and probably add some fees. So you enter the transaction in GBP instead of USD. But that means waiting until transactions clear.
No what I meant was when you enter £100 on the payment form, it then autofills the purchase invoice for £100 thus making the exchange rate for purchase invoice and payment identical.
However, that might require some complex coding as manager copies from invoice to payment, not the other way around and this would break the concept of paying a different amount to the invoice total as you might not be paying in full.
So I would actually recommend just having a base currency field on the purchase invoice that can be filled out manually when you know what the base currency amount is.
So what would happen is that on the 1st april you put $150 and on the 4th April you see £100 come off your bank account, so you then go back to your purchase invoice and put in the amount £100 in the base currency field so that the purchase invoice and payment both show £100 and $150 and they both effectively balance as the amount is £100 on the first and still £100 on the 4th and you don’t need to fiddle around with exchange rates.
Granted you can only fill out the pound amount when you see your bank statement to see what the actual amount will be.
Anyway, thats just my thoughts on the issue as I find that every single time I do a foreign currency transaction, I always have to spend 5 minutes getting the stupid thing to balance the exchange rate profit/loss thing.
Hope that makes sense.
I think that its necessary to have multiple currencies as otherwise how can you tell if the supplier has increased prices if Manager only shows the purchase invoice in base currency.
But why, “the exchange rate profit/loss thing” is just a rounding process between the rates used. It appears that having accounts with in-consequential balances seems to be more the issue.
Alternatively,(to remove those irksome balances), instead of entering the Suppliers Purchase Invoice wait until the payment has been made and then enter the “purchase invoice” as a Spend Money cash purchase, but this would involve converting each USD line item to GBP values, so possibly the same 5 minutes.
The reason I have problems is because I do a transaction like that every 6 months or something. I only have two suppliers that charge me in Dollars. So I forget what I need to do to get it to work.
It’s not a huge deal, I just think the current concept design is cumbersome and I suggested another way of doing it, that would be much simpler for users who are not good with accounting and/or maths.
Anyway thanks to this conversation I better understand how it works, so that’s good.