Small problem with exact values when exchanging currencies, let me show in example:
This is what i see when i transfer from our EUR bank Account to the EGP account
which is nice and is exactly the type of wut=who i need to see
BUT in the option menu for setting exchange rates i get this:
which is really hard to give exact values in anything this is used for, is there a way i can switch to set how much eur = egp instead?
Not if EGP is your base currency. The Exchange Rates setting lists other currencies in terms of your base currency.
Ah shame i kind of expected the answer, but wouldn’t it be a viable option to have?
cause right now the Foreign exchange gain (loss) account is filled with 0.01 EGP entries all around and it looks ugly :X
Reversing the order of presentation will not change anything. All you will have done is invert the numbers. If the exchange rate does not produce a nice, round, equivalent number at the precision of the currencies involved, you can end up with small gains/losses. This can be true no matter which way you go.
Your first example happens to produce a convenient, round conversion. Partly, that is because the converted amount (19,000) only has two significant figures (no decimal places). If it were 19,000.01, the conversion would be to 203,310.807 EGP. Now what do you do with the rounding error.
Using your exchange rate screen shot (which, by the way, is a different exchange rate than your first example), 203,300 EGP turns out 19,233.68022705771129 EUR. Just as messy.
Now what if the exchange rate fluctuates only slightly? Retail buy/sell rates are often quoted to four decimal places, but bank rates are even more precise.
While it might be more convenient for you, mentally, to reverse the order, nothing changes the math.
Actually, all sources of exchange rates present the rates as units of local currency per USD, except for a few exceptions such as GBP, and for exchange rates between currencies other than the USD, the information is presented as units of the weaker currency per unit of the stronger currency. So, for most non US users, of the exchange rate is only units of foreign currency per unit of local currency, the user has to calculate 1/rate for every exchange rate entered.
With this in mind, being able to enter the exchange rate in the way it is usually presented instead of having to calculate the inverse exchange rate every time you need to input an exchange rate would be helpful.
I think it would actually be very helpful to have the option to choose which currency to corvert from/to. For example, I use RWF as my base currency and when I buy Euros we get for example 1.010 RWF for 1 euro. This is the actual cost of the foreing currency. But instead I have to transform it into 1 RWF = 0,000990099 which is not precise and is difficult to deal with. If there was an option to switch a specific day’s exchange rate as 1 Euro = 1.010 RWF it would be so much better.
Manager is always going to state foreign currencies in terms of your base currency. That is just to avoid confusion if you have different companies with different base currencies or if you have multiple exchange rate entries over time with the same foreign currency.
Your comment about your calculated rate being imprecise is valid, but not crucial. What you have shown is accurate to 9 decimal places, which is more than any bank would quote when buying or selling currency.
I assume you are using a number format that employs a dot for the thousands separator and comma for the decimal separator. If so, your examples are off. 1 EUR is approximately 1000 RWF, subject of course to daily fluctuations.
Can you explain more fully why you are buying the euros ?
If you have a supplier (euro currency) and are paying their Purchase Invoice then there is no need to enter an exchange rate when making the payment.
We import goods from Europe so we need to buy Euros locally using RWF in order to send money to the suppliers who invoice us in Euro. At the same time when the goods land here we pay several import taxes. Customs apply their own exchange rate to the Euro in order to calculate taxes.
This means that the cost of goods is influenced by 2 different exchange rates to the Euro, but while the customs rate is converted automatically into RWF and we pay in RWF, in order to pay the supplier in Europe we have to go to a forex bureau and get Euros (usually at a rate that is higher than the customs one).
Also, these payments happen at different times so there can be huge differences in the exchange rates, and I haven’t figured out how to manage them properly. It seems Manager gets exchange rates automatically from somewhere and if I add my own exchange rates these are valid only for the specific day, not for a period of time (i.e. until the date of a new exchange rate I add). This means that in theory I have to add my actual exchange rates (e.g. what I pay to the forex bureau) for each and every day, which is basically impossible.
Ok, so you only need to enter an exchange rate for the Invoice, as there is no need to enter an exchange rate for the payment. If your euro supplier sends you an invoice for 100 euros, then the Purchase Invoice would look like this using 1 RWF = 0.8 euros:
And the Summary tab would be this
If you need to spend 150 RWF to acquire the 100 euros then just enter both of those currency amounts in the Spend Money when paying the invoice:
Now the Summary tab looks like this:
Read this topic where there is a worked example of importing inventory with separate supplier invoice + courier/freight invoice + import duty/taxes and using Freight-in
Thank you for the reply.
First of all I would like to understand where Manager gets exchange rates from in case I do not add any exchange rate myself.
We have RWF and EUR accounts. When we pay a supplier in EUR we basically take RWF from the RWF account, go to a forex to get EUR, deposit the EUR on the EUR account and finally pay the supplier from the EUR account. This is because forex have much better rates than banks. I didn’t know that in Manager I could select the RWF account to pay EUR by indicating the amount in EUR, so your suggestion should do tthe trick even if I do not exactly pay to EUR suppliers from my RWF account. I guess Manager will allocate automatically the cost of goods to each single item in the purchase invoice based on its price in EUR and the actual exchange rate that results from the payment in RWF of the correspondant EUR amount. I need to try this and see…
The link to the topic Importing of goods is very interesting, but I do not see to understand the whole thing. Especailly the 100% VAT option. In our case we pay Import duties, Excise tax, Witholding tax, some other small taxes, and then VAT. All these taxes, including VAT, are based on different calculations and tax bases. For example VAT is calculated on FOB prices + Import duties and Excise, but not on other small taxes. It gets very complicated to handle all this and basically I haven’t been recording VAT on imports at all, and I have used Excel to have a better overview of the overall VAT situation.
Manager does not get exchange rates from anywhere.
Well when I started to use Manager, it had already a set exchange rate from my base currency (RWF) to the other three currencies we use (EUR, USD, ZAR).
In relation to my previous replies, the problem is also that if I have to pay for example €2.450 I usually buy €2.500 which means that €50 remain on the EUR account. This makes it more difficult to use a payment in EUR from my RWF account as indicated by @Brucanna above.
I think there is a placeholder exchange rate table in the software, but not meant to be accurate, probably only to avoid divide by zero errors that crash the program.
I don’t think @Brucanna meant to imply you could spend EUR from a RWF account, only that you could pay a bill denominated in EUR from a RWF account by entering the corresponding amounts that applied to that exact transaction. This will override the currently set exchange rate.
If you are buying, holding, and transacting in Euros, you need to create a bank or cash account denominated in Euros.
Yes, we have accounts in different currencies and this is why in Manager we transfer money from one to the other using the actual exchange rate used to buy forex. And here I go back to the initial point: I would prefer to be able to add in Manager an exchange rate as €1 = 1.010 RWF (even if my base currency is RWF) instead of 1 RWF = €0,000990099 as this is a lot more complicated and it does not give me the exact convertion rate (here 1.010 RWF become €0,9999999…)
When making an inter account transfer between accounts denominated in different currencies, you do not rely on exchange rates you have entered. You enter the actual amount transacted in each account in their native currencies. Here is an example for a base currency of Euros:
The exchange rate entered under Settings (only for purposes of illustration) is 1 EUR = 0.8 GBP. But an inter account transfer was created between Main bank account, denominated in Euros, and Branch bank account, denominated in Pounds:
The program calculates and displays the effective exchange rate when the transaction is viewed:
Yes. Your example though is based on simple numbers. This is the example I was talking about:
The actual exchange rate should be €1 = 1.010 RWF, but here iit is instead €1 = 1.000 RWF (1% less)
Equity is just the name of the bank.
Also, if I transfer the money from one account to the other on let’s say the 5th of November but use the Euro on the 7th of November to actually pay my supplier, I think I have to add also an exchange rate for that specific day (the 7th) that has to be the same (€1 = 1.010 RWF). Correct? This is what I experienced with a recent payment. After doing the interaccount transfer I saw the cost of the goods was too low and therefore tried to add the exchange rate for that spedific day of the payment. The cost of goods went up and closer to what it was supposed to be, but not exaclty what it was supposed to be based on the actual bills and taxes paid. I think I still haven’t figured out how to handle our specific cases.
The numbers themselves have no influence on the correctness of the calculation. Your example states that 2525000 RWF were transferred to an account denominated in Euros, and that the Euro account received 2500 EUR.
2525000 RWF / 2500 EUR = 1010 RWF/EUR, as you say. The result of that calculation just happens to be a whole number. But that is not how the program displays the exchange rate. Turn the equation around and you have:
2500 EUR / 2525000 RWF = 0.000990099009901 EUR/RWF (rounded to 15 decimal places, though the fraction would repeat endlessly). When displayed with four decimal places, that becomes 0.0010. In fact, you do not know what precise exchange rate was used by the bank.
Had the exchange rate been just slightly different, say 1009 RWF per Euro, the Euros deposited would have calculated to 2502.4777. Since Euros can only be divided into cents, the bank might have deposited 2502.48, yielding an apparent exchange rate of 1008.99907 RWF per Euro, not exactly correct. More likely, the bank would have deposited 2502.47, giving a calculated exchange rate of 1009.0031 RWF per Euro, also not correct.
The important thing in this situation is not what the exact exchange rate was, but that two bank accounts denominated in different currencies show transactions in precisely stated amounts. Rounding and display have nothing to do with that.
No. Because you will pay your supplier from an a Euro account, exchange rates are not involved at all. If the supplier bills you 523.71 Euros, you will pay exactly 523.71 Euros. If the exchange rate is different on the 7th than it was on the 5th, that 523.71 Euro amount might be worth more or less in your base currency. But that fact doesn’t enter into the payment transaction.
Ok clear, But when I pay 523.71 euro from my Euro account, I still have to convert that in RWF because that is what is going to influence my cost of goods which is defined in RWF, hence my margin on the sales of those goods, hence my taxes at the end of the year, and also the value of my overall stock. Maybe I am not a good accountant and I try to use an uncorrected method. But when I calculate my cost of goods I this:
For this reason finding the right way to convert my expenses in Euro is very important. If I pay 1.010 for 1 euro that is what I have to use to caculate how much the cost of the good was.
Not so. The cost of goods was determined when the purchase invoice for them was recorded. The cost is represented in Inventory on hand until a sales invoice is created, when it is transferred to Inventory - cost. When you pay your supplier, you are only settling the amount owed in Accounts payable. That transaction actually has nothing to do with inventory or cost of goods.
You don’t have to calculate this at all. Manager does that for you. This is why everything is presented in your base currency except actual accounts denominated in foreign currencies. You may enter a purchase invoice in Euros. You can only do that if the supplier is denominated in Euros. Manager will convert the cost of inventory into RWF based on the exchange rate in effect. That cost in RWF never changes, regardless of what exchange rate movement there may be.
Now you can sell that inventory in RWF. Or, if you have a customer denominated in Euros, you can sell it for Euros and the program will deduct cost of goods in RWF, because that is how it is calculated. But this calculation is independent of what exchange rate you might get when transferring money into and out of bank accounts denominated in Euros. What you use money in a bank account for is immaterial. The fact that you exchange money just to pay one invoice does not matter.
If you add freight, duties, and taxes to the cost of inventory, you can do that with transactions in any currency as long as the supplier is denominated in that currency. Manager will still convert them to RWF for calculating the value of inventory. (By the way, additions to inventory cost should be done in accordance with procedures described in this Guide: https://www.manager.io/guides/9610. This is done before you sell the items, not as part of the sales transaction.)
