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Local and system currencies

SAP Business One enables parallel accounting in two currencies: the local currency and the system currency. This configuration is defined in the Administration module under System initialisation in the company details.

Local currency: This is the currency that the company is legally required to use for its accounting. For example, if a company is based in Germany, the local currency would usually be the euro (EUR).

System currency: This is an additional currency used for reporting and consolidation purposes. The system currency may differ from the local currency and is particularly useful for globally active companies whose subsidiaries in different countries use different currencies. For example, a company based in the USA could use USD as its system currency, while its European subsidiary has EUR as its local currency.

SAP Business One calculates all postings in the local currency and at the same time maintains an additional account balance in the system currency. This parallel accounting makes it possible to create consolidated financial reports and seamlessly integrate the financial data of the branches into the central system. This enables companies to efficiently implement their global financial strategy and increase the transparency of their business processes.

Account currencies

SAP Business One offers flexible options for handling account currencies, allowing companies to optimise the management of their financial transactions. There are three main scenarios for account currencies:

1. Account currency = local currency: In this case, journal entries are recorded in the local currency. The system converts all transactions into the system currency in real time and displays them in separate columns in the journal entries. The Account balance is displayed in both the local currency and the system currency. Internal reconciliation is carried out in the local currency.
2. Account currency = Fixed foreign currency: Journal entries can be entered here in both the local currency and the specified foreign currency. The account balance is displayed in the specified foreign currency, the local currency and the system currency. The account is reconciled in the foreign currency.
3. Account currency = All currencies: In this scenario, you can journal entries in every foreign currency set up for the company as well as in the local currency. The account balance is displayed in the local currency and the system currency. Reconciliation takes place in the local currency.

This flexibility in account currency management allows companies to efficiently fulfil various currency requirements while taking into account the effects of exchange rate fluctuations.

Use of foreign currencies in vouchers

SAP Business One allows you to specify item prices in the main currency and up to two additional currencies. This function is particularly useful for internationally active companies. This is because they often have to offer prices in different currencies and issue invoices in these currencies.

When creating a sales document for a foreign customer, the system automatically selects the currency of the customer. business partner. It also uses the corresponding prices from the price list. For example, if the main currency of the price list is British pounds (GBP) and the additional currency is US dollars (USD), the price is displayed in USD when a US customer is selected. The system converts the total invoice amount into the local currency and posts both values in parallel in the journal entry.

Exchange rate differences

Exchange rate fluctuations can lead to differences when paying invoices in foreign currencies. SAP Business One handles these Exchange rate differences automatically and posts them to a special exchange rate difference account.

Exchange rate differences can have different causes. For example, if a company receives an invoice in a foreign currency at a certain exchange rate and payment is made at a different exchange rate. The system automatically posts these differences as Effort or income. This is done depending on whether it is a loss or a profit. This is done in the Exchange rate differences window in the Financial module.

Translation differences

In addition to exchange rate differences, there are also translation differences that arise when the local currency differs from the system currency. SAP Business One offers a function for the automatic revaluation of these differences on a defined key date, usually the end of a period.

The system proposes journal entries to clear these differences and these entries are only made in the system currency. It is recommended that you use the function for translation differences before the Period-end closing to ensure accurate financial data.

Manage currencies efficiently

SAP Business One offers a comprehensive and flexible solution for dealing with multiple currencies and handling exchange rate differences. Parallel accounting in local and system currencies, multiple options for account currencies and the automatic handling of exchange rate and translation differences help companies to organise their global financial processes efficiently and error-free. These functions make SAP Business One a tool for companies that operate internationally. They can be used to consolidate financial data in order to achieve greater transparency and accuracy.