The Mechanics of Multi Currency Journal Entries and Ledgers (USD 1:1 transaction)
Lets quickly talk about the tech behind setting up multi-currency transactions. In the previous example we looked at moving fund from India to Canada, how would we build the transaction within the ERP? Before we answer that question, lets look at a simpler transaction, moving funds from India to USA.
Transaction # 1
While moving funds from India to USA, we had an agent who converted the funds on our behalf from INR to USD. With this simplification, we would write a one for one transaction where funds would come directly into the corporate account of the health care organization (in USD), since FX would occur upstream. Payment actions would include Wire Transfer and the Settlement would include an Internal Transfer to the USD GL account of Corporate Entity. These specific values would push via API from our application middleware to the ERP.
Transaction # 2
Now in order to send funds to the hospital, we would focus on moving the funds out from the Internal Account and remitting them using an outgoing wire template (EFTO) verified through a separate wire transfer process which we will discuss later. Note, since this is an US Corporate Entity, the settlement would remain a one for one deal. In addition, you use ACH (similar to an EFT) if the remitting bank and settlement bank are in the US. The total of the Payment and Settlement match, however, $30 is extracted as revenue for the transaction and is moved into the Broker Account.
Transactions in the US Books (1 & 2)
What happens if we needed to do this for a Canadian Corporate Account? The first assumption we need to make is for multi-national orgs - the books and ERP are completely separate. Hence the Corporate Client would be on the Canadian set of books, not the US, and the funds would need to be transferred between the Canadian and US Brokerage accounts to manage cash flow and transparency. Since the Corporate Client is Canadian, we would need to assume that their settlement is in CAD. If its in USD, the third transaction is also a 1 for 1 and the revenue would be withdrawn like above.
Transactions in the CAD Books (3 & 4)
Okay now that we have spoken about the basic mechanics, lets get into the technology next.