Tips for managing a multi-currency business account
Suppose your own company buys products in China and sells them in Europe. You will face the situation where you have to pay suppliers in RMB and receive payments from consumers in Euros. It often becomes difficult for a business to deal with multiple currencies.
Is international trade in goods and services routine for your business? So choose a multi-currency account can add value to your business.
What is a multi-currency business account?
A multi-currency business account allows a business to hold, receive and transfer money in different currencies. The best advantage of this type of account is that the account details, for example, account number, beneficiary name and SWIFT code remain the same for each transaction. Currently, most banks offer businesses the option of opening a multi-currency account. The minimum currencies they offer include Euro, USD, Yen, Australian Dollar, Yuan, etc.
A multi-currency account can help businesses save time, effort, and cost while making or receiving payments in different currencies. This means that cross-border transactions would become easier and more advantageous with multi-currency accounts.
How to effectively manage a multi-currency business account?
When it comes to getting the most out of a multi-currency business account, you need to manage it effectively. In the beginning, things can be a little complicated because of the volatile nature of currency.
So, here are some effective tips you need to consider to manage your multi-currency account successfully:
Understand the basics of multi-currency accounting
With increasing globalization, companies have partners, investors, suppliers and customers all over the world. To manage a multi-currency account, it is essential to know the basics. Save time learning the basics, including:
- How does a multi-currency account generally work?
- What is the role of the base currency in your multi-currency business account?
- What currency is associated with each ledger in your chart of accounts?
- Multicurrency in GL input, and more.
Learning such important but also fundamental things will allow you to understand how multicurrency business accounts work.
Regularly update your exchange rates
We all understand that the currency conversion rates are dynamic. These changes very quickly. Thus, exchange rate management is also important to effectively manage a multi-currency business account.
There are two different ways to manage exchange rates. These generally include:
· Record real-time exchange rates for your transactions
First, you can start by adding real-time exchange rates into each transaction. Retrieve the latest exchange rate via a third-party service. Or manually enter the real-time rate in transactions.
This practice will help you record the exchange loss or gain with each payment entry.
· Set a fixed exchange rate for a certain period.
Second, you can set a specific exchange rate for a period to publish all of your transactions accordingly. Then, revalue your liabilities and assets at the end of the specified period. This will help you create a detailed exchange record for better account tracking.
Periodically reassess the exchange rate
It’s important to periodically reassess your assets and liabilities. You can set your period quarterly, monthly or yearly according to your needs and preferences. Then post an entry with the title Exchange Rate Revaluation to your file.
Be sure to practice these tips mentioned above to manage your multi-currency account. Thus, enjoying the benefits of a multi-currency account can become easier.