Applying multicurrency cash receipts in Dynamics GP
First of all, we need to understand the basic concepts behind multi-currency management in Dynamics GP: Functional Currency and Originating Currency. To be able to use Dynamics GP's multicurrency functionality, a base currency must be configured for each company. We refer to this currency as the "Functional Currency" and it is considered the base currency for accounting purposes. In other words, the functional currency is the currency in which all accounting transactions and financial reports will be ultimately expressed by default. From that point, any transaction can be executed in any currency that is properly set up in the system. The specific currency in which a particular transaction is executed is known as "originating currency" and can be either the functional currency or any other currency. For the purposes of this article, we will refer to any currency that is not the functional currency as an "originating" currency.
Knowing these basic concepts, we can infer that there can be situations in which sales documents can exist in any of the available currencies (functional or not), and customers can make payments also in any currency. So there can be multiple scenarios when you attempt to apply a cash receipt to a sales document based on all possible combinations of currencies. There are certain design rules to an apply process involving multiple currencies that dictate how the system will behave and how the process must be done, according to the following table:
The apply process itself will vary depending on how it is done:
- IN PROCESS/APPLY ON THE FLY: In the Cash Receipts entry window, if you click on the APPLY button, you will only be able to apply to documents in the SAME originating currency ID as the cash receipt is in.
- TWO STEP PROCESS: If you post the Cash receipt first (leaving it unapplied), and then navigate to Transactions | Sales | Apply Sales Documents window, you can apply the cash receipt to invoices that are in the SAME originating currency ID as the cash receipt, or invoices in the FUNCTIONAL currency ID.
The main reason behind these rules is that Dynamics GP needs to consider the potential multi-currency exchange rate effects when a sales document is being paid. When an originating currency document is being fully applied (therefore becoming "paid") Dynamics GP will calculate any income/expense from potential changes in exchange rates from the time the document was created to the time the document was paid, and generate the corresponding journal entries for you automatically.
- In any case, Dynamics GP allows you to execute transactions in multiple currencies accurately and efficiently.
- Until the next tip!