In today’s globalised economy, it’s not uncommon for businesses to have operations in different countries.
Whether you’re a big corporation with multiple subsidiaries in all the major continents of the world, or simply a small business with clients overseas, the importance of being able to do accounting-related tasks in more than one currency has become crucial to success.
What is multi-currency accounting and should you jump on it?
We’ll answer these questions and more so you can make an informed decision about whether or not this type of system could be useful for your business.
What is Multi-Currency Accounting?
Multi-currency accounting refers to a system that allows you to do your business and accounting tasks in multiple currencies, rather than just one. In other words, if you own a business in the UK and have a customer who’s based in the US, you’ll be able to make all your accounting transactions in GBP without having to manually convert any transaction from USD.
Multi-currency accounting works by converting all transactions into a single base currency, which is normally the one in which you hold your bank account. Then, it uses a foreign exchange market to convert all the transactions into the second currency of choice automatically.
It does this using multi-currency accounting software.
When businesses operate internationally, they need to keep track of two or more currencies: their local operating currency (group currency) and the currency of the transaction. This could be further complicated where organisations have operations in multiple regions, each with its own local currency.
Multi-currency accounting software helps users maintain records in these different financial jurisdictions simultaneously; it also does conversions between them automatically based on current rates.
What Can You Do with Multi-Currency Accounting?
Multi-currency accounting software is a great way for international businesses to manage their financials.
It’s especially helpful for organisations that have clients, customers, suppliers, employees or donors in different countries, as it allows them to calculate the currency conversion automatically and keep track of all transactions in real-time.
As a result, you can see how your organisation is doing from anywhere in the world thanks to cloud-based access.
In addition, multi-currency accounting is important for businesses that import or export goods.
When you’re shipping products to another country, the selling price of those items is sensitive to the exchange rate between the currency in which the stock is held and the currency of the sale. This means it’s easy to lose money if foreign exchange rates aren’t converting properly into your business’ currency.
However, multi-currency accounting software eliminates this risk by facilitating conversions in real-time.
Another advantage is that you can make estimates of the performance of your business’ sales quickly with up-to-date numbers.
Who Should Use Multi-Currency Accounting Systems?
If your business operates internationally, multi-currency accounting is one of the smartest decisions you can make. It’s particularly helpful if you have customers or suppliers who are located in different countries.
Using this type of system will allow you to keep track of all transactions with accuracy and ease, so all you’ll need to do is sit back and relax while it does the work for you.
However, if your business isn’t involved in international transactions or imports and exports, multi-currency accounting might not be what you need right now.
In that case, you should track down a system that will simplify transactions within your own country.
How to Get Started
As it’s something associated with international companies, you might think that using a multi-currency system would be horrendously expensive – but this isn’t always the case.
Many small businesses are running their operations successfully on these systems because they offer many advantages for both business owners and their employees.
Our multi-currency accounting software is capable of handling even the most complex multi-currency requirements, supports unlimited transactional currencies, daily and monthly rates and multiple currency values per transaction to allow group consolidation. It also comes with support for revaluation out of the box.