March 26, 2020

Accounts Receivable Foreign Currency Revaluation with Dynamics 365

Small Business
Ronald B. Allen

You can manage the whole range of bookkeeping and accounting chores with Microsoft Dynamics 365 Business Central. One important job, in particular, is tracking accounts receivable when you accept payment in foreign currencies. Here is an overview of the revaluation process that Dynamics 365 goes through to keep you abreast of how much you are owed and whether you are effectively gaining or losing money as the dollar goes up or down versus the currency in question. This is an especially important issue these days as the dollar is rather strong and more business is coming from regions like Latin America where currencies have weakened against the greenback.

Dynamics 365 Foreign Currency Revaluation Process

With Dynamics 365 you can keep track of how much you are owed in US dollars, even when your customer will be paying in Mexican pesos, Canadian dollars, or Brazilian Reals. The book value (theoretical value) of your foreign currency open transactions goes up or down with exchange rate fluctuations. You can update the value of these transactions in dollars by running the foreign currency revaluation process in Accounts Payable. (You can also update amounts that you owe to vendors in foreign currencies in Accounts Receivable. You will use a new exchange rate in revaluing your open accounts but not settled accounts. And, you will set this for a specific date.

When you do this there will be a difference between your revalued amounts and the posted amounts. This causes an unrealized loss or gain for each of your open transactions. Dynamics 365 takes care of this by updating your Accounts Payable (or Receivable) subledgers to be consistent with the loss or gain. Then the system posts the accounting entry to your General Ledger. Here is how it goes.

Foreign Currency Revaluation Simulation

Dynamics 365 lets you run a simulation report as your first step. Go to the Foreign Currency revaluation page and choose the Simulation button. This report will give you a preview of your unrealized loss or gain depending on the parameters that you enter in the simulation.

Processing Foreign Currency Revaluations

You will typically want to keep track of what is owed you in offshore currencies on a routine basis. To do this, go to Periodic Tasks and then the Foreign Currency Revaluation page. You can run a revaluation from here whenever you like and you can schedule the revaluation. Set the parameters you want to use and set it up to print a report as well. If you want a printed report, set this up to be done automatically as the system will not reprint a report after it has completed the process.

The report will show you balances at both the currency level and the customer (vendor) level.

• Total foreign currency balance

• Total foreign currency balance in your accounting currency for the last revaluation

• Total foreign currency balance in your accounting currency for the current revaluation

• The difference between the two valuations which is your unrealized gain or loss

• The total unrealized loss or gain for each individual currency

To review your list of revaluations, go to the record on the Foreign Currency Revaluation page and choose transactions. This will show you a detailed list of all revaluated open transactions. When a transaction has been revalued more than once, you will see two or more records. These will display any reversals of previous gains or losses as well as the new unrealized losses or gains.

Running the Currency Revaluation Process

Click the button or Foreign Currency Revaluation and define these parameters:

Method to be used for the revaluation

Standard: Post the foreign currency revaluation job no matter if there is a profit or a loss

Minimum: Post the revaluation only if it shows a loss

Invoice date: Use the original exchange rate that revalues to the original accounting currency value. (This method cancels any previous currency revaluation.)

Considered date: Uses the date when transactions are found. The exchange rate will be for this date. Should you later run a revaluation for an earlier date the system will not go back to that date but to a more-recent revaluation date.

Date of rate:  – The date that determines the exchange rate that is used in the foreign currency revaluation.

Use posting profile: Here you will use a pre-set posting profile.

Posting: This is the posting profile for this customer transaction.

Select: Enter your posting profile in the Posting Profile field. If you use this, the profile decides how the revaluation is carried out.

Financial dimensions: These are posted on foreign currency revaluation transaction accounting entries.

None: No financial dimensions will be posted. If your account structure requires a financial dimension the process is still run. But it creates entries with no financial dimensions. There will be a warning message that will allow you to cancel your revaluation if you wish.

Table: In this case, your financial dimensions for the customer account or a vendor account are posted on the transactions for foreign currency revaluation.

Posting: Your financial dimensions will be posted on the transactions. The process defaults to the financial dimensions from your original transaction's AR/AP ledger account for the AR/AP main account while it defaults to the original transaction's expense/asset/revenue ledger account for the unrealized gain/loss main account for revaluation transactions.

Getting a Handle of Accounts Payable Foreign Currency Revaluation

When your business sells offshore and you accept payment in foreign currencies, it is important to track exchange rates and how they affect what you are currently owed. The business intelligence capabilities of Dynamics 365 let you do this efficiently. And, when you do this routinely and see how it affects your profits, you can adjust prices and terms accordingly. If you would like help setting this up, contact us at Exigo Business Solutions.

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