We recently had a discussion with one of our customers regarding foreign currency.  The customer has a bank account in US dollars (USD) but has a few customers that they invoice in Canadian Dollars (CAD).  They in turn get payments in Canadian Dollars that they deposit straight into their USD account.

 

Navision allows the user to post payments and invoices in different currencies to the same vendor or customer but transactions to the bank account have to always be posted in the same currency.  The issue arises when the user invoices the customer in CAD and then received a payment in CAD.  Upon entering the payment in the cash receipts journal, when they put the bank account as the balancing account the system complains that the bank account has to be in the same currency as the payment.  The way around that is to enter the payment in a single line using CAD then the bank line in the following line using the LCY (Local currency). 

 

The system will accept the above entries in the cash receipt journal, but normally those entries will not balance out.  The payment and the invoice are updated at the currency exchange rate, recorded in the system, at the document date of the transactions.  The rate recorded in the system, is usually the standard rate published by financial institutions.  The rate which the bank will post, might be slightly different.  Additionally, the bank might charge service fees for cashing the foreign currency check into a USD account.  The net of this is what is reflected on the bank statement. 

In order to accommodate the banks nuances, Navision offers a hot key button on the cash receipt line, when the cursor is placed in the Currency field.  The user can press the 3-dots button and get an input screen which shows the exchange rate the payment (and applied invoice) are currently valued at, and allows you to change that for this transaction only.  This is where you can put in your banks exchange rate.  The service fee can be added as another line in the journal debit to the bank charges cost account and the net debit bank.  Now you have a net amount to the bank that matches the amount given to you by the bank.

 

Things to remember in foreign currency:

Unrealized gains/losses
Gains and losses posted by the update exchange rate routine, which calculates exchange rate differences of open invoices, cr. Memos for vendors and/or customers.
 

Realized gains/losses
Gains and losses posted from Unrealized to Realized when invoices, cr. Memos get closed out by a payment, normally to the bank.