Microsoft Business Central | Foreign Exchange Rates and Transaction (Demo)

I want to show you the foreign currency functionality in Dynamics 365 Business Central. We’ll look at currencies, how you can set up currencies and track currencies, how you can automatically update exchange rates in all the currencies that you have identified, and then we’ll look at how to record transactions that have foreign currencies as the originating currency. We’ll revalue the currencies at the end of a period, then we’ll recognize the gain and loss on that period when that transaction is closed out.

Currency Setup

These are the currencies that I’ve identified in my Business Central system, and I’m going to be using during this demonstration: the Canadian dollar and the Mexican peso. You can see the current exchange rates as of September 4th.

Transaction Posting

Now, I posted two transactions on September 1st. Let’s take a look at those. I have these two sales invoices that are recorded on September 1st. Let’s open those up. You can see the posting date is September 1st. This particular invoice is denominated in the Mexican peso; you can see that here. All these line amounts and the total amounts are also represented in the Mexican peso. So, this sales invoice was posted with Mexican pesos into accounts receivable, and the exchange rate at the time converted that to US Dollars and that was posted to my general ledger.

Currency Reports

If I go back to my currency window, I can run a report that shows me how I’m doing on my currencies. These are the current foreign currency transactions that I have in my system. These are all receivables; you can see the Canadian receivables there and the Mexican one that we just looked at. Here’s the peso amount: thirty-seven thousand two hundred forty-four Mexican pesos. When that was posted, it was posted at 220.1 US Dollars. The current value as of September 5th is two thousand one hundred seventy-nine dollars. This is a handy report because you can run it at any time, and this will allow you to analyze your open receivables and payables that are denominated in foreign currencies.

Currency Exchange Rates

Let’s look back at my currencies table. I’ve got the currencies identified here, and you can see that I’ve got the current exchange rates and this is the date that they’re updated. I’m currently using a free exchange rate service; we’ll take a look at that. It updates at the end of the day. So when I go into September 5th, which I am today, it’s looking at a rate that was updated at the end of September 4th, just before midnight. And I can always look at the exchange rates here.

Exchange Rate Service

Let’s take a look at the exchange rate service. I’m using this free service from Float Rates. It’s easy to set up. You can see that in the service URL, I’ve got the XML data identified, and then I do some basic field mapping that’s down in the lower part of this window here.

Currency Revaluation

I’ve posted the transactions with originating currencies in Canadian dollars and Mexican pesos. They were automatically converted to US dollars to be posted to my general ledger. At the end of a reporting period, I’m going to adjust my outstanding foreign currency holdings. I’ve got foreign currency holdings in receivables, and I’m going to adjust them to the current exchange rate as of September 5th. So let’s go do that.

I’ll adjust the exchange rate. I’m going to leave the starting date open. I’ll adjust it as of September 5th and post it as September 5th. Let’s go ahead and do that.

So right now, the foreign currency transactions that I posted back on September 1st have been revalued for the exchange rates as of September 5th. If I run the foreign currency balance report again, you can see that the posted value of those transactions has been updated to the current value. These are the transactions that were posted to my general ledger to adjust my foreign currency holdings and receivables. You can see the adjustments have adjusted receivables. The last three here are receivables, and it adjusted them to an unrealized currency gain and loss account that I show in my owner’s equity.

Currency Payment Receipts

So, it’s a couple of days later. It’s after the period end, and I received payment from my customers. Let’s take a look at that. Here’s the cash receipts journals for the payments I’m receiving from my customers. The first one is Trade Research; you can see that customer’s paying with Mexican pesos. Here’s the amount of the invoice. Here’s the amount in US Dollars based on the current day’s exchange rates. The second customer, Datum Corporation, pays with Canadian dollars. Here’s the total amount of that invoice. Here’s the amount in US Dollars based on today’s current exchange rate.

Currency Payment Posting

So, let’s preview the posting and see what’s going to happen. These are the journal entries that are going to happen when I post this transaction. It’s going to show the deposit in the checking account, credit receivables, it’s going to back out the unrealized currency gain losses from the period-end adjustment, it’s going to realize a real loss of 58.79.

Currency Rates After Payments

Let’s take a look at today’s currency rates; you can see those rates here. I can run this report, and because my Canadian dollar and Mexican peso positions have been cleared out, they no longer show up on this report. I no longer have foreign currency exposure for the Canadian dollar and the Mexican peso.

Transaction Summary

Let’s take a look at the transactions related to this demo. I had two sales invoices, one in Canadian dollars and one in Mexican peso. They were posted at the time they were posted; this was the US dollar amount that was posted in my general ledger based on the exchange rate of September 1st. At a period-end in September 5th, I did an exchange adjustment, adjusting these foreign currencies to the current exchange rates. I had unrealized losses on both the Canadian dollar and the Mexican peso. A few days later, on the 6th of September, I actually received payment from these customers. I recorded that; it backed out the unrealized losses and recorded the real losses based on today’s receipt.

Conclusion

So in this demo, we looked at currencies; we looked at the foreign exchange rate services that you can set up in Business Central. We looked at two foreign exchange transactions related to sales invoices. We also did a revaluation on foreign currencies at a period end to make sure that they are properly represented in my financial statements. And then we received payment and recognized actual losses on those foreign currency payments.