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Bank Reconciliation

Foreign Currency Settings

Foreign currency business is frequently conducted at fixed exchange rates. Standard Microsoft Dynamics 365 Business Central, however, always uses the dated standard exchange rate. In addition, applying a foreign currency invoice with a payment in the same foreign currency on a foreign currency bank account produces an exchange rate difference whenever invoice and payment were posted at different rates.

With the foreign currency settings in 365 business Banking you store fixed exchange rates per bank account and per customer/vendor, and you can specify that a payment adopts the exchange rate of the entry it is applied to.

Order of precedence

When posting through the payment reconciliation journal and the general journal, the currency factor of a line with a bank account, customer or vendor is determined in this order:

1. Applied-to entry – if Use Applied-to Exchange Rate is active on the bank account and the line is applied to an entry, the rate of the applied entry is used. With several applied entries, the earliest entry date counts.
2. Fixed customer/vendor rate
3. Fixed bank account rate
4. Standard exchange rate of Business Central

Storing a fixed exchange rate on the bank account

Fixed rates are maintained by date per account and currency – just like the standard currency exchange rates.

1. Open the Bank Account card.
2. Choose the Fixed Exchange Rates action. The Bank Account Currency Exchange Rates page opens.
3. Enter per line:
   • Currency Code
   • Starting Date
   • Exchange Rate Amount and Relational Exch. Rate Amount

The currency factor is the exchange rate amount divided by the relational exchange rate amount.

The Has Fixed Exchange Rate field on the bank account card indicates whether fixed rates exist for the account.

Storing a fixed exchange rate on the customer or vendor

1. Open the Customer or Vendor card.
2. Choose the Fixed Exchange Rates action. The Customer/Vendor Currency Exchange Rates page opens, filtered to the respective account.
3. Enter the rates as on the bank account.

Here as well, the Has Fixed Exchange Rate field indicates whether rates exist.

Enabling the applied-to exchange rate

1. Open the Bank Account card.
2. Set the Use Applied-to Exchange Rate field to Applied-to Entry.
3. When a payment through this bank account is applied to an entry in the payment reconciliation journal or general journal, the payment adopts the exchange rate of that entry.

Example: an invoice of USD 1,000 was posted at rate 1.10. The payment of USD 1,000 arrives on the USD account while the daily rate is 1.12. Without the option an exchange rate difference arises, even though nothing remains open in USD terms. With the option, the payment is posted at 1.10 – no exchange rate difference occurs.

See also

• Bank Account Reconciliation
• Foreign Currency Settings (Fixed Exchange Rates)