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Handling exchange rate fluctuations between purchase and sales price

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You can set the system up to identify and compensate for the fluctuation in exchange rates for a purchase currency of an item. These changes in exchange rates can be calculated and applied to the sales price at invoicing, meaning the sales price can be higher or lower depending on the fluctuation.

This functionality is controlled by a function control (Currency Clause handling) that needs to be activated. The customer and the item must also be defined to be valid for currency clause handling.

The changes in exchange rate are controlled by a currency clause code, which is automatically retrieved to the sales order line at order entry if the CURRCRTV (Auto currency clause retrieve) function is activated in the Function control file. The retrieval of the code is dependent on the currency of the main supplier for the item and the sales order currency. If the CURRCRTV (Auto currency clause retrieve) function is not activated, no automatic retrieval will be performed. Instead the user will need to enter the currency clause manually. It is possible to manually change the code or remove it from the order line. The currency clause code is defined in a table in which an agreed purchase rate is defined together with an agreed fluctuation percentage.

At invoicing a sales price adjustment is calculated. The agreed purchase rate from the currency clause code table is compared with actual purchase rate. If the change in percent is more that the agreed fluctuation the sales price will be calculated to be higher or lower than the original price. How much the customer will pay or gain is controlled by the Exposure percentage in the Currency clause code table.

Impact

Quotations

When a quotation line is entered and if the customer and the item is defined to use currency clause, the system tries to find a valid currency clause code based on the currency of the quotation and the currency defined for the main supplier of the item. If a valid code is found, it will be attached to the quotation line.

The currency clause code will be printed on the quotation printout.

Sales order entry

When a sales order line is entered and if the customer and the item is defined to use currency clause, the system tries to find a valid currency clause code based on the currency of the order and the currency defined for the main supplier of the item. If a valid code is found, it will be attached to the sales order line.

The currency clause information is printed on the order confirmation.

Sales order copy

When a sales order is created by copy, there are three possibilities to select how the currency clause should be handled:

  1. Use the same currency clause code as the order being copied.
  2. Retrieve a new currency clause code from the table.
  3. If the order is copied from an invoice the already adjusted price on the invoice can be used instead of retrieving a new currency clause code.

Order structures

Currency clause codes are retrieved to order structures, sales and quotation, according to the following:

  • Sales price calculation code 1 (Mother sales price is used, components are set to zero) and 3 (Components sales prices are summarised to mother at sales order entry and then set to zero). Note: A currency clause code will only be retrieved from the mother item.
  • Sales price calculation code 2 (The mother and components sales prices are retrieved individually) and 4 (Components sales prices are summarised to mother at invoicing and then set to zero). Note: Currency clause codes will be retrieved both for the mother and for the components.

Requests and returns (BPR:s)

There is no automatic retrieval of currency clause codes when a BPR item line is manually entered. It is, however, possible to manually enter a valid currency clause code.

The same possibilities exist when a BPR line is created from an invoice as when a sales order is copied.

  1. Use the same currency clause code as the invoice being copied.
  2. Retrieve a new currency clause code from the table.
  3. Use the already adjusted price from the invoice that is being copied.

Calculation at invoicing

At invoicing the current rate for the purchase currency is retrieved and compared to the agreed rate in the Currency clause code table. The calculation is performed as outlined below:

Example – data defined

Original sales price: 100.00
   
Currency clause code:  
  • Agreed rate:
1 / 2.00 = 0.50
(See below for explanation)
  • Fluctuation:
5.00 %
  • Exposure:
7.00 %
   
Invoicing:  
-Actual rate: 2.40

Agreed rate in Currency clause code table cannot be defined the same way as in the Exchange rate table where all rates are defined related to system currency. A currency clause code can be set up with two currencies and none of them are system currency. Therefore agreed rate in the Currency clause code must always be defined as:

Sales currency / Purchase currency

In this example: 1 / 2.00 = 0.50 (Note: 2.00 would be the rate in the Exchange rate table.)

Example – Calculation

  1. When actual exchange rate, between purchase and sales currency, is retrieved during invoicing the system calculates it the same way:
  2. Sales currency / Purchase currency

    In this example: 1 / 2.40 = 0.41666

  3. Then the difference between agreed rate and actual rate is checked:
  4. 0.50 – 0.41666 = 0.08333
  5. Then a check is done to see how much the change is in %:
  6. 0.08333 / 0.41666 = 0.19999

    0.1999 * 100 = 19.99 %

  7. Is this change greater than agreed fluctuation?
  8. 19.99 > 5.00 (Yes)
  9. Calculate sales price fluctuation:
  10. 19.99 / 100 = 0.1999

    0.1999 * 100 (SALP) = 19.99

  11. Calculate how much the customer should pay (exposure):
  12. 7.00 (expos) / 100 = 0.07

    0.07 * 19.99 = 1.3993

  13. New sales price:
  14. 1.3993 + 100 (SALP) = 101.3993

    Rounded to 101.40

Enquiries and printouts

  • Sales order enquiry
  • Quotation enquiry
  • Customer service enquiry
  • Invoice enquiry
  • Open sales order list printout

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