FX Currency Settings - Control Your FX Currency Settings With Ease

FX Currency Settings Overview

Access is provided here to the FX Currency Settings of SapphireOne with checkboxes and data entry fields for controlling the FX functionality provided. This feature is located at Utilities > Controls > FX Currency Settings.

SapphireOne creates secondary General Ledgers for each foreign currency being used in SapphireOne. All Vendors, Clients and General Ledger transactions create multiple entries for posting into the FX and Main Accounts. 

Depending on the General Ledger Inquiry selected the actual way these are displayed will alter and these are documented on the following page in this article. When a General Ledger Inquiry is executed the General Ledger account will have the General Ledger Account ID followed by the department ID added as a suffix. 

For the Bondi Blue sample data file, the Department for Sydney is 0, zero so the suffix will be a – followed by the department I 0 or zero. For example the first General Ledger in Bondi Blue is 1000 so this will be displayed in the list as 1000-0. However if an FX General Ledger Inquiry is executed all of the General Ledger accounts in SapphireOne will be displayed as follows. The Local Account is recognized by the suffix /M (Master), FX Accounts by / plus the three letter ID nominated for the FX currency. These suffixes are appended during FX implementation. (G/L Suffix pop up) Again for Bondi Blue the first General Ledger Account appears is 1000 and they will initially be displayed in alphabetical order as follows: 1000-0/GBP, 1000-0/M, 1000-0/NZD and 1000 -0/USD 

When FX is operational every transaction in a foreign currency is posted to the relevant FX Accounts and the converted values to the Main General Ledger Accounts. The conversion is calculated using a rate in the General Ledger Types, which can be reset at any time, but are typically left for a pre-determined period: week, month, quarter etc. If required, the default rate can be varied during transaction entry, or at any time prior to Posting. 

Foreign Currency adjustments are created automatically in Accounts Mode. Inventory and Project transactions are converted to local currency at the rate specified in settings or manually entered when the entries are posted. 

No matter how many FX types there are in SapphireOne, SapphireOne only requires a single G/L account to manage any profit or losses for all G/L types. 

A complete list of General Ledger accounts is also held in Accounts mode. The following documentation is a brief synopsis of their details and management. Full details may be found within the Accounts Mode knowledge Base articles. 

Implementation of FX Currency Settings

It is critical you make a backup prior to activating any FX Changes. 

Existing Sites

Before FX is activated, it is highly desirable that the following procedures are performed. The more that is accomplished in this phase, the less adjustments that will be required. This will prevent any subsequent reconciliation problems occurring for existing outstanding transactions. 

1. Reconcile all Bank Accounts recording Foreign Currency and note the Opening Balance. You must specify a default foreign currency per Bank Account within General Ledger. 
2. Fully and accurately allocate any outstanding payments or receipts to the relevant invoices for all active Foreign Currency Clients and Vendors. 

All Sites

1. FX Gain Loss Account – Create an FX Gain/Loss Account – Normally a Profit & Loss Account. 
2. Linking F.X gain Loss Account -Go to Utilities > Company > Control Accounts page and link the General Ledger account you have just created to the F.X. Gain, Loss Account in the data entry field.
3. System Controls – While SapphireOne will use the Company control account first, the user is advised to also enter the same details into the System controls as a backup. to do this go to Utilities > Controls > System Controls > Control Accounts page and then enter in the F.X. Gain and Loss Account there as well. 
4. G/L Bank Accounts – Create a Bank Account for each foreign currency required. 
5. FX Clients – Create Open Item Clients for which sales in foreign currencies will be made (even though the Client in the local currency may already exist). 
6. FX Vendors – Create Open Item Vendors from whom purchases are made in foreign currencies. Again, separate Vendors per currency for the same reasons as outlined in the preceding step 

Foreign Currency, PAYG and Prompt Discount Clients and Vendors must be created as Open Item Clients/Vendors for allocation purposes.  Also if a Client is to trade in more than one currency there must be a separate Client created per currency. 

For ease of use create a New Client using the same ID of the existing Client and suffix with the mnemonic for the currency. This will have the benefit of ease of selection for inquiry and reporting purposes while the lookup function during transaction entry will remain unchanged. Do not forget that currencies are now in their three character formats. AUD, USD etc. 

Activation of Foreign Currency (FX)

1. Create Foreign Currency Exchange references. 
2. Select Utilities > Controls > FX Currency Settings as seen below.

Currency Types Area

The options are as follows.

GL Suffix	Enter a currency code. (SapphireOne suggests that the three character country code is used). This will be appended to every Account in the Secondary Ledger.
Import Code	Enter the three digit International Code for the currency.  E.g. USD for US Dollars, NZD for New Zealand Dollars.
Name	The name of the Currency. The three digit code for Australia is AUD
Opening Currency Rate	The initial conversion rate must be the answer to the following question: How many units of foreign currency will one unit of local currency buy? For instance, if one Australian dollar will buy 77.56 US cents, the conversion rate for US Dollars will be .7756.
Currency Format	Standard SapphireOne format prefixed with the FX abbreviation. E.g., USD$###,##0.00;(USD$###,##0.00);

Place Holders

• Place Holders – Pound # symbols are utilised as place holders. For example if Japanese Yen is to be used in the data file additional # place holders will be necessary as seen just below. This is because there are around 80 or so Japanese yen to the dollar so the amounts will be larger by that factor. JPY¥###,###,##0.00;(JPY¥###,###,##0.00);
• Format – The format before the ; is for plus balances, and all after the ; is for negative values
• Locking in – Once you have completed all the details for the new FX currency and select ok you will be presented with a pop up screen as a check. Select the Yes button to lock the conversion rate in.
• FX G/L Accounts – For each and every local currency General Ledger Account in SapphireOne will now create its FX counterpart.
• Checking – The user will now have to go through all of these new General Ledger Accounts and check that all is correct. While the account ID’s will be correct some of the account names will have to be changed. Particular attention must be paid to any General Ledger Accounts that are Bank Accounts and the currency that they are to be held in.

FX Currency Settings

Any additional FX currencies that are used in SapphireOne are set up in Utilities > Controls > FX Currency Settings using this function. 

Currency Display

• The three letter currency GL Suffix must be entered in the Currency Format field. For example $###,###,###,##0.00 for any FX currency will display $00.00 irrespective of the FX currency that SapphireOne is using for the transaction.
• Entering the correct three letter prefix, for example USD$###,###,###,##0.00 will result in SapphireOne displaying USD$00.00 which is correct for US dollars.
• Taken literally the following example is also possible XXX$###,###.###,##0.00 will display XXX$00.00. This means that it is possible to have a different FX suffix to the FX prefix added to transaction amounts. While not recommended it is possible to use a different Suffix as in General Ledger accounts and have a different prefix when displaying FX amounts in transactions. In new data files this should not be a problem as the GL Suffix and the Currency formatting would be set up correctly.
• In data files that have been converted to from earlier versions of SapphireOne and are subsequently not displaying FX amounts correctly please check your currency formatting here first.

Master Settings Area

While other financial systems use multiple accounts for FX Gain and Loss, SapphireOne uses just a single G/L Account across all currencies. This area allows the setting of a sole Foreign Exchange Gain/Loss General Ledger account used for the handling of variations in all currencies exchange rates, from the time of purchase/sale and payment of transactions. Note that this setting will apply across the whole system and will be used for all currencies. 

After you have the new FX currency set up highlight it and go to the Master Settings area in the lower left hand corner of the screen and proceed as follows. 

• Enter the default FX Gain/Loss GL Account. 
• Enter the three Character International Local Currency Code. 

The Accounts for the local currency are suffixed /M [Master], those for the FX currency with /xxx, where xxx is the three letter General Ledger Suffix created above. 

Repeat for each foreign currency required and then click the Save button. 

Setup

Once you have installed FX on SapphireOne, go to the Master Defaults System screen located at Utilities > Controls > Master Defaults > System . 

The first check box in the General Defaults area must be selected and consideration will also have to be given to the two checkboxes in the data Entry area as well. 

• Select the Display in Entered FX checkbox in the General defaults, Inquiry area. This will then display all transactions in the currency in which the entry has been created. 
• Two check boxes in the Data Entry area may also have to be selected. 

The following details concerning the three checkboxes are taken from the Master Defaults section of this reference manual. 

• The Display in Entered FX checkbox allows transactions to be displayed in the Local currency value after conversion from the foreign currency value. 
• Selecting the Batch Email as Default checkbox causes SapphireOne to propose sending a batch email instead of the single email option. 
• When the FX based on Date In checkbox is selected SapphireOne will apply the FX rate to Transactions with FX in them based on the Date In entered in the transaction and the FX rate in SapphireOne on that same day. 

Currency Types Area

Conversion Details Area in FX Currency Settings

This is the area on the right-hand side of the main screen. When first opened this drop-down menu is unpopulated. When you select the menu and select a currency, the Conversion Start & Last Change details are then filled in. 

This area stores the conversion rates for each currency and the dates that they are to become active. It also stores the date that the last change was made to the rate. 

The New button allows the entry of new conversion rates. Next enter in the date and the new rate of exchange. Once that is done press enter and the new rate will be placed in the list at the top. 

It should only be necessary to update your conversion rates on a monthly basis. However it will be necessary to monitor exchange rates either via the Internet or via your Bank for current exchange rates. 

Establishing FX Bank Reconciliation

Opening Balance for a Debit Balance 

The opening balance (as noted previously), needs to be converted from local to foreign currency. In essence the procedure will zero the balance from the Local Currency bank and bring the equivalent value in foreign currency into the FX Bank Account. 

Step 1

1. Create a General Ledger Clearing Account. 
2. Select Accounts \ Payables \ Cash Payments. 

Tracking Area

1. Enter an appropriate reference in the Invoice field: (E.g.: Adjust). NB FX is not permitted. This is suggested for tracking purposes. 
2. Enter an appropriate notation in the Internal Reference or Cheque No field: (e.g.: Clearing). This is suggested for tracking purposes. 
3. Ensure the Period is correct. 
4. Enter the Date In if different to today’s date. 
5. Enter the Amount in Local Currency. 
6. Select the Bank Account to be cleared (Paid From). 
7. Enter appropriate details in Payee and Memo. This is suggested for tracking purposes. 

Line Items 

1. Select the Clearing Account. 
2. Enter the Amount (in Local Currency) Accept and Save by using either the Next Record button or the Save button. 

Step 2

1. Enter the Opening Balance in the Foreign Currency. 
2. Select Accounts Mode \ Receivables \ Cash Receipt. 

Transaction area

1. In the Paid To data entry field select the relevant FX Bank Account. (SapphireOne by default displays the local currency bank account, so this FX bank account must be entered first as once SapphireOne determines that an FX bank account is being used there will be additional details displayed on screen). 
2. Enter an appropriate memo in the Order No field (e.g., Adjust). This is suggested for tracking purposes but the characters FX in any manner for form is not allowed. 
3. Enter in a Receipt reference number. This is suggested for tracking purposes. 
4. Check that the Date In and the Period details are correct. (SapphireOne will automatically insert the both the current date and period automatically). 
5. Select Cash from the drop-downList box, just below the period entry point. 
6. Enter the Amount, converted to the FX Currency. (You will have to use a calculator).The value should be the same value as that entered during the Step 1 process this will be displayed directly below as SapphireOne will calculate it once entered. 

As a check when the FX Bank Account is selected SapphireOne will display the currently installed exchange rate and the calculated amount in the Local currency. 

Line Items

1. In the Account data entry field select the Clearing Account. 
2. In the Amount data entry field enter the Amount (FX Currency) Accept and Save by using either the Next Record or Save buttons. 
3. Continue with this process for all FX Bank Accounts to be set up. 

For FX Bank Accounts that have a Credit Balance the same procedure applies in reverse. 

Post All Transactions

Mark the appropriate entries and Process. 

The posting function screen is located at Accounts > Payables > Post Transactions and Accounts > Receivables > Post Transactions.

Un-presented Items

• Each entry that appears in the FX Bank(s) Reconciliation Screen needs to have the local currency value converted to its foreign currency equivalent. This process is performed using the same steps as detailed for Opening Balances. 
• It is highly recommended that the original references be used to facilitate backtracking that is, use the same Date In and Internal Reference as appears in the Bank Reconciliation screen. Ensure that the correct Period number is used. Depending on your internal control requirements you may wish to post the transactions to the original period, or the current, or perhaps, even a future period. 

FX Currency Settings for Existing Clients or Vendors

Miscellaneous Area

If an FX currency is established in an existing data file, it is NOT possible to link it to any currently existing Clients or Vendors. If linkage from an existing Client or Vendor is required, that Client or Vendor will first have to be made inactive. Then a new Client or Vendor will have to be created and the instructions here used. 

The Currency drop-down menu in the Miscellaneous Area in a Client or Vendor Inquiry will not be displayed for existing Clients and Vendors. 

It is only displayed when a NEW Client or Vendor is being created. Once the new Client or Vendor has a transaction of any type auctioned against them drop-down currency menu will not be displayed again. (That is when the balance moves from zero). 

Existing Records Conversion to Foreign Currency

The following procedures when performed correctly will have a NIL net effect on the Master General Ledger. All journals to the Main General Ledger are posted in local currency. 
The adjustments to these records are necessary to allow future transactions in foreign currencies to be correctly linked, allocated and reconciled. 

Before normal transaction entry can re-commence, all outstanding balances will need to be converted to their correct currency. This is achieved by reversing the outstanding entry in the Local Currency ID, and re-entering the transaction in the appropriate FX Currency ID. 

For example, if you have an outstanding Client Invoice that needs to be in a foreign currency, a Credit Memo needs to be created for the Local Client, then the Invoice is re-entered in the FX Client. For an un-reconciled Bank Deposit, create a Cash Payment in the Local Bank, then a Cash receipt in the FX Bank. 

Foreign Currency Bank Account

It is important that all cash (banking) adjustment transactions are entered via Cash Payments (Payables) or Cash Receipts (Receivables).There are major benefits associated with this procedure: one is ease of entry with the availability of relevant tracking references; another is that there is no need to change allocations, they remain correct. The use of General Journals will result in the loss of significant linking references and the creation of incorrect allocation entries that will need to be fixed. 

FX Currency Settings for New FX Vendors and Clients

Miscellaneous Area

Any NEW Clients or Vendors that are to trade in a foreign currency will need to be linked to the appropriate FX currency already set up on SapphireOne. For both Clients and Vendors this is done in the second screen, in the Page drop-down menu, More Details. 

1. Select the relevant Currency from the drop-down list box in the Miscellaneous Area. 
2. The currency drop-down list now contains most of the more commonly used currencies from around the world 
3. Accept and Save by using either the Next Record or the Save button. 

This sets the default currency for all transactions for this new Client or Vendor from this point forward and it cannot be altered once their balance moves from zero.  This because the drop-down menu for the selection of a currency will no longer be displayed. 

Clients/Vendors – Outstanding Transactions

All outstanding transactions for Clients and Vendors need to be transferred to their FX Currency ID. The principle is the same as for Bank Accounts, the Local Currency ID needs the Balance Outstanding to be zeroed, the FX Currency ID needs the outstanding transactions created in the appropriate currency. 

The process is the same for both Vendors and Clients. To maintain accurate aging each individual record must be transferred and posted to the original period. For example: A Client with an outstanding Invoice will need to have a Credit Memo entered in the Local Currency and Allocated to the Invoice. Enter the Invoice into the FX Client. Interchanging Vendors for Clients will achieve the required result for Vendors. 

As was mentioned earlier in this manual you cannot convert existing Clients or Vendors to FX. You will note that in the example used over the following pages we have used from the Bondi Blue Demo BILBEN as the example. 
We then created BILBEN US as a new Client and at the time of creating the new client set the currency that they are to trade in as US, for US funds. Unless it is intended that the original local Client or Vendor will continue to trade in the local currency it is recommended that they be made inactive. 

Zero Local Currency Client Balances

Step 1 

1. Select Accounts Mode > Receivables > Credit Memo.
2. Enter the Local Currency Client ID. 
3. Enter something into the External Reference for tracking purposes. (FX in any manner or form is not allowed). 
4. Enter the appropriate Period. Care must be taken to ensure accurate aging. 
5. Enter the Internal Reference of the original document, if duplication is not allowed, add a suffix. 
6. Enter the Date In. 
7. Enter the Amount in Local Currency of the original Invoice. 
8. The Memo field should be used data for tracking purposes. 
9. Enter the Clearing Account. For Bondi Blue this is 3995-0. 
10. Enter the amount in local currency, Accept and Save by using either the Next Record or select the Save button. 

The Credit Memo must be allocated to the Invoice within the Local Client. 

Step 2: 

1. Select Accounts Mode > Receivables > Client Invoice.
2. Enter the FX Currency Client ID. SapphireOne will recognize this as an FX transaction and will make some changes to the details displayed in this area. The Total heading will become Total USD and once the USD value is entered the local value and the conversion rate currently in SapphireOne will be displayed in an additional row of data just below this data entry field. 
3. Enter an Order Reference such as TRF_US for tracking purposes. (FX in any manner or form is not allowed). 
4. Ensure the Period is correct in terms of your aging requirements. 
5. Enter the number of the original Invoice. 
6. Enter the Date In of the original invoice. 
7. The FX Currency Code will appear in the currency drop-downlist box. 
8. The Memo field should be used data for tracking purposes. 
9. Enter the Clearing Account. For Bondi Blue this is 3995-0. 
10. Enter the amount in Foreign Currency, Accept and Save by using either the Next Record or Save button. 

Post Transactions

1. Select Accounts > Receivables > Post Transactions 
2. Mark all the FX adjusting transactions and select the button. Once you have done this for all the Local Currency Clients they should now have a zero balance. The balances that were in the local Clients will now be transferred to their FX counterparts. 

Implementation is now complete. SapphireOne is ready for normal operations utilising foreign currency. 

Normal Operations

Adjusting Default Conversion Rates

Select Management > General Ledgers > General Ledger Settings.

Conversion Details

Select the Currency to be changed from the drop-downlist box. Click the Add at the lower right of the screen. Enter the new rate in the Conversion box. Enter the date of effect in the Start Date box, select the Save button when all rates have been adjusted as required. 

Once the exchange rate has been altered SapphireOne must be rebooted before the alteration will be implemented. 

Accrual Function

This function works out your accrual FX exposure and will create a GJ for this accrual if you wish. 

It should only be necessary to up date your conversion rates on a monthly basis. However, it will be necessary to monitor exchange rates either via the Internet or via your Bank for current exchange rates. 

Processing Payments and Receipts with FX

• When SapphireOne detects that an FX transaction is being processed the Transaction area will display additional details one of which will be the actual exchange rate in SapphireOne at the time of processing the transaction. 
• This Exchange Rate that is displayed may be altered at any time prior to posting by clicking on the conversion factor, which appears under Payment Type. 
• When the exchange rate is clicked on, SapphireOne will display a pop up enabling the entry of a new exchange rate for this transaction only. 
• It is important to ensure the correct FX Bank Account is nominated when processing Payments or Receipts. From the screenshot above SapphireOne has selected the correct US Funds Bank Account. It is important to always confirm this. 
• If a Payment or Receipt is entered to a different Exchange Rate to that of the linked Invoice, after allocation and posting, a journal will be created recording the variance to the FX GAIN/LOSS Account, reversing all earlier adjustments to this account. 
• The FX Column in all of the Transaction Inquiries for all modes in SapphireOne is utilized when required. Normally no code is displayed but when SapphireOne recognises that the transaction is an FX transaction it will display the currency prefix as seen below. That then indicates that the amount it refers to is in that currency Inventory > Sales > Transaction Inquiry and Accounts > Receivables > ,Transaction Inquiry.

There is also a in the Page in both the Client and Vendor Inquiries entitled, FX Balances. 

Inventory and FX

Once FX is installed. SapphireOne will display the FX prices. 

FX Balances and Aging

From either a Client or Vendor Inquiry select from the Page menu FX Balances. 

Transactions appear by default in the currency that the Client or Vendor trades in as seen above USD. 

The Aging Balances may be displayed in any currency by selecting the appropriate FX Type from the drop-down list box. The Aged Balances in the Local currency are shown below AUD. 

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