How To: Multiple Foreign Currency Cash Receipt Settlement

By Marty Zigman , on December 13, 2016

This article is relevant if you are looking to accept one foreign currency as payment for a customer invoice denominated in another currency.

Background

During a recent NetSuite implementation for a fast growing US based company which sells its hot products worldwide, the Controller requested guidance on the following situation:

The books are USD based.
The customer invoice was denominated in Euros (EUR).
A customer gave them British Pounds (GPB) to settle the transaction.

Our client tried all kinds of things to settle out the transaction using credit memos and other application techniques. Due to extensive work I have done with Bitcoin on the NetSuite platform, I believe I see less commonly understood ways to transact with foreign currency. I have spoken about foreign currency before in this article, NetSuite Foreign Currency Transaction Application Considerations and in this article, Solve NetSuite’s Multiple Mixed Currency Payments Challenge. This is a new practice that is even easier in my mind. Here is how I suggested our client settle these types of transactions.

Leverage the Undeposited Funds Account

Some clients with a lot of transactions avoid the use of NetSuite’s Undeposited Funds account as they use cash clearing accounts instead (a subject for a different article). In our case, the Undeposited Funds account is going to become our friend.

Visualize the following situation physically:

Invoice (€100): You demand €100 for selling a service to your client. This is foreign currency to you and it worth about $110.
Payment (£84): She hands you £84 and you agree to accept.
Bank Deposit (£84): You then go to your bank and hand them £84 and they accept without conversion fees because it is British Pound denominated.

Now, here is what you do in NetSuite:

Step 1: Accept Payment: Go to the invoice and accept payment in full for €100 because you agreed it is 100% paid. Allow the cash account to go to Undeposited Funds.
Step 2: Bank Deposit: Go to your GBP bank account and then find the payment you just accepted. Indicate that you received £84 against this transaction. Commit your work.

That’s effectively it. You are done and it really wasn’t that hard.

Other Considerations

There is a consideration however. If you go to the Bank Deposit GL impact, you may notice that NetSuite will classify the transaction with unrealized currency gain / losses due to currency price differences. In reality, the gain and losses are realized. So if you want this perfect, you will need a reclass entry. Another approach is to modify the currency price at the time of the bank deposit to zero out the price effects. Yet, the likely reality is there are differences in market rates from the currency you accepted — yet in some respects, you implicitly agreed to a foreign currency price when you accepted the £84 to settle the €100 invoice. At this point, I usually have conversations with the CFO to understand how they view the world so we can line up the practices to meet their expectations.

Get More Care for NetSuite Operations

My goal here is to show a use case that is not well understood by the NetSuite community. My hope is this article helps streamline some of the practices currently being used in many accounting departments. If you are looking to work with a team of NetSuite experts, perhaps we can have a conversation.

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Marty Zigman

Holding all three official certifications, Marty is regarded as the top NetSuite expert and leads a team of senior professionals at Prolecto Resources, Inc. He is a former Deloitte & Touche CPA and has held CTO roles. For over 30 years, Marty has produced leadership in ERP, CRM and eCommerce business systems. Contact Marty to set up a conversation.

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How To: Multiple Foreign Currency Cash Receipt Settlement

Background

Leverage the Undeposited Funds Account

Other Considerations

Get More Care for NetSuite Operations

See Related Articles

Marty Zigman

About Marty Zigman

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