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Re: Journals, accounts and foreign currency

by
Kevin.McMenamin
- 05/13/2015 15:31:03
Eva

We have encountered a similar situation in NZ. We have had to do a lot of development in the accounting area to harden up the multi-currency aspects Odoo.

For the GL, every transaction is in the local currency but can have an additional currency and amount in that currency.
Obviously, price lists can be in any currency, so related transactions such as PO and invoices are in whatever currency is required. We have the option on an invoice to set the exchange rate for conversion purposes.
For receipts and payments we have written our own payment and banking module. When receipts or payments are made they can be recorded in two currencies and exchange variances are taken care of.

This way you need only one set of journals and accounts.

If you would like to know more feel free to email me.


Kevin McMenamin
ERP Capability Manager

Mobile  +64 22 651 3753
Phone  +64 9 977 5805
Email   kevin.mcmenamin@solnet.co.nz

Solnet Solutions Limited
Level 19, Crombie Lockwood

191 Queen Street, Auckland 1010
PO Box 6619, Auckland 1141


www.solnet.co.nz  




From:        Eva Pinter <epinter@openit.ch>
To:        "Community" <community@mail.odoo.com>,
Date:        14/05/2015 04:35 a.m.
Subject:        Re: Journals, accounts and foreign currency





Thanks Mohammad for all the comments. The reality is: as it is, the system is very complex to use and does not fit with the reality of what is happening in the companies.  Many remarks are obviously wrong as they work totally differently in other systems, e.g. SAP, for which you can very easily create documents in foreign currency, reconcile in that currency and have a foreign reevaluation once a month. I do not know about Xero, so, I cannot say, if it would fit the needs of my customer. And yes, it’s a pain, if I have to write a lot of customisations for basic accounting. I am expecting to write customisations for complex and unknown business processes, but accounting is not somehting that is company specific, only country specific. And what seems very easy to do, takes a huge amount of time, once the number of transactions and currencies is high.


In conclusion: I notice, that I do not basically do anything wrong, but I have strong/high requirements that are not covered by Odoo. It’s the opportunity to propose some simple changes that can transform a 10 minutes task in a 1 minute task.

Good Luck
---
Eva P.

Affordable high quality training on Odoo-training.com





On 13 May 2015, at 14:01, Mohammad Alhashash <alhashash@alhashash.net> wrote:



On 13/05/15 12:37, Eva Pinter wrote:
<blockquote cite="mid:961D7D31-AD67-4384-9B77-50F6C86C5B11@openit.ch" type="cite">

Hello Mohamad,


Thanks for the detailed explanations.

My remarks are

1. I may have an account in EUR, but the customer pay me in USD. I should be able to register the payment without having to create a new payment method and a new account. I should also be able to register the exchange rate at which the transaction took place. This is not possible in odoo. I have to maintain another GL account and another journal. Then, I need to create a hiearchy to be able to see the balance on this journal and see, if it matches my bank balance. Sounds to me like a lot of work. Not if you have 1 transaction every 14 days, but if you have a multicurrency company like a trader.
If you received an amount different currency than your account currency, your bank will either convert it to the currency of your account and add it normally, or keep it in a suspense account waiting for you to cash it or give instructions. In both case, you cannot record the amount in USD unless you have a bank account or cash registry in USD.

<blockquote cite="mid:
961D7D31-AD67-4384-9B77-50F6C86C5B11@openit.ch" type="cite">

2. My problem with the foreign currency is that I need to be able to maintain all my transactions in the foreign currency. It’s then not logical for me, to enter the debits and credits in local currency and to add the currency (on each line first, what should not be allowed) and then to have to enter the foreign currency amount as + and -.
What I would like is to valuate my balance at the end of the month and not have exchange done on a daily basis (not even automatically), but manually.
Accounting must be done in company currency. The amount in foreign currency is an extra information for reporting and analysis. I made simple module to automatically set the currency sign based on debit/credit (and some other usability features too).  You can also easily add a column for rate as a functional field and use on_change method to automatically set debit/credit based on currency and rate if it helps.

This is for manual entries, for vouchers, bank statements, invoices, .... company currency amounts are calculated based on rates at the document date.


<blockquote cite="mid:
961D7D31-AD67-4384-9B77-50F6C86C5B11@openit.ch" type="cite">

3. If I have a foreign currency account and I cannot reconcile in foreign currency, I have non real exchange rate gains and losses daily. This is quite difficult to explain, due to the fact that I have done the exchange once and then was using the foreign currency. This is changing my results, without being real. I will check if this is GAAP compliant, but I have my doubts…If someone knows, please confirm that it’s ok to have it this way.
You seem to have some needs that requires customization. You may create reports to show unrealized gain/loss without doing journal entries. Check the "Unrealized Gain Or Loss" report at Accounting/Reporting/Generic/Multicurrency for a starting point.

<blockquote cite="mid:
961D7D31-AD67-4384-9B77-50F6C86C5B11@openit.ch" type="cite">

4. Between the currencies and the clearing accounts, I have to create 30 journals. Does this sound like a nice thing to do and manage on a daily basis? In SAP, I have 1 clearing account per GL account representing a bank. I do not need to create a journal and certainly, I do not have to select in a list of 30 journals the payment method. I just select the account and it’s done. Now, if I have a multi-company system, I have for each company another 30 journals. Is it really working? 2 companies and 60 journals only for payment and currency management?
If you have 30 bank accounts, you have to select between 30 something. Either journals or account would not make much difference. You may customize Odoo to show only relevant journal for each document types. For example, show only clearing journals in vouchers, and only bank journals in statements.

Odoo is lacking a lot in the field of bank/cash handling. That why bank statement is completely rewritten in v8. A lot of changed already done in v9 and many are still expected. There is still no integrated support of clearing accounts. In v9, you do not need clearing accounts as you can reconcile bank statement line against already recorded transactions like in Xero, JD Edwards and many other accounting systems .

<blockquote cite="mid:
961D7D31-AD67-4384-9B77-50F6C86C5B11@openit.ch" type="cite">

5. See point 1. Problem is not solved.
You may handle this through manual journal entries instead of bank statements/vouchers. You may use account with no secondary currency and define currency and amount per transaction to have all transactions in one account. You may also make a custom module to simply the process.


<blockquote cite="mid:
961D7D31-AD67-4384-9B77-50F6C86C5B11@openit.ch" type="cite">

Now, I have a very complex structure in order to manage just the payments with different payment methods and in different currencies. I would say, for me, it does not do the job properly. It’s complex and slow to use on a daily basis, if you have to deal with multicurrency.
Multicurrency is very complex anyway. If you think there is a prefect implementation in other systems, please describe it. I have similar problems and needs and can work on it.

Check Xero accounting. They made a near perfect accounting workflow and Fabien seems to be impressed about their system. I'm not sure about their multicurrency support.


Regards,

Mohammad Alhashash

<blockquote cite="mid:
961D7D31-AD67-4384-9B77-50F6C86C5B11@openit.ch" type="cite">
If anyone has enhanced these very points, I would be happy to have a look into it.


---
Eva P.

Affordable high quality training on Odoo-training.com





On 13 May 2015, at 09:07, Mohammad Alhashash <alhashash@alhashash.net> wrote:



On 13/05/15 00:21, Eva Pinter wrote:
<blockquote cite="mid:0A968376-3001-4D03-B415-2C09FA9AC0AB@openit.ch" type="cite">

Hi all,


I wanted to know if I am doing something wrong with the journals, accounts and foreign currency

1. It’s not possible to pay (using the menu point pay) in a foreign currency if you do not have a journal in that currency.
Te be able to own or handle foreign currency, you need to have a bank account or cash register in this currency. Bank/Cash accounts in Odoo are represented by a journal of type "Bank and Checks" or "Cash" and the associated financial account with internal type "Liquidity". The financial account must be set as the default debit/credit account of this journal.
.
<blockquote cite="mid:
0A968376-3001-4D03-B415-2C09FA9AC0AB@openit.ch" type="cite">
2. If you want a journal in a foreign currency, you need to have an account in that very currency.
This is not enforced technically (I think so but I did not to verify it). Note that you use any currency with accounts without secondary currency. When you set a secondary currency on account it, enforces that any transaction must include the amount in that currency. So account secondary currency is actually a constrain.

Also, any account can be used in any journal unless it is restricted by the journal control option.


<blockquote cite="mid:
0A968376-3001-4D03-B415-2C09FA9AC0AB@openit.ch" type="cite">
3. Even with an account in foreign currency, you cannot reconcile in foreign currency. The reconciliation is always done in the local currency, creating so exchange differences on each and every single reconciliation.
Currently, manual reconciliation works on the company currency, so, it does not match amounts in foreign currency or create exchange gain/loss entries; you have to create it manually or use write-off during reconciliation..

For example, If your company currency is USD and you registered a 1000EUR supplier invoice at 1250USD equivalent. Later, you paid 1000EUR at 1100USD equivalent. If you paid using a voucher (Supplier Payment or used the "Pay" button on invoice), the exchange gain will be recorded. But, if you did not reconcile in the voucher and used the manual reconciliation later, you would see the 1250USD due amount and the 1100USD payment. You can select both lines and choose "Full reconcile with write-off" in the wizard. You should select the exchange gain account as the write-off account. Another option is to create a manual journal entry for the 150USD gain (with 0.00EUR eq.) to reconcile the 3 lines in the payable accounts (1250 Cr., 1100 Dt, and 150 Dt.)

<blockquote cite="mid:
0A968376-3001-4D03-B415-2C09FA9AC0AB@openit.ch" type="cite">
4. If you have an approval concept and use a temporary account on which you first post the payment until the bank/credit institute confirms it, you have to create a corresponding journal and account.
This is called "Clearing Accounts", you can do this. Actually, this is the standard way of handling bank accounts in most other ERP systems. For example, In SAP, usually there are 3 clearing accounts for each bank account.

<blockquote cite="mid:
0A968376-3001-4D03-B415-2C09FA9AC0AB@openit.ch" type="cite">
5. If you have multiple payment institute (typically: bank, postbank, paypal, AFEX, FOREX) and work in 3 currencies (EUR, GBP, USD), you will then have to create for each payment institute a 6 GL accounts and 6 journals. So, in my case, 30 GL accounts and journals.
Yes. Note that each bank will create a separate bank account for each currency and will issue different statements for each. Also, it may be legally required (or at least it is the standard accounting practice) to have a separate account and journal for each bank account.

You should organize your accounts in a tree structure. For example, create a view for each currency, then a view for each bank account, then under the bank view, create the bank and clearing accounts.


Regards,

Mohammad Alhashash

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