You can use AutoLockbox to import and apply receipts when the currencies of the receipt and the transaction are different. For example, your functional currency is the US dollar, and you create invoices for your customers in that currency. However, you have many international customers, so you need to accept payments in different currencies. AutoLockbox can import and apply cross currency receipts for each currency defined in your system.
You can also use AutoLockbox to import receipts and apply euro receipts to transactions denominated in former National Currency Units of the euro. AutoLockbox also supports euro to predecessor currency applications, and vice versa.
Currencies that have a "floating" relationship do not have an established exchange rate. Floating exchange rates change frequently and can vary considerably from one day to the next. The US dollar and the Japanese yen, for example, have a floating exchange rate. To apply a receipt when the receipt and transaction currencies are different and do not have a fixed relationship, AutoLockbox requires that application and exchange rate information be provided in your bank transmission file.
Currencies with a "fixed" relationship have an established, non-fluctuating exchange rate. For example, when EMU currencies were abolished and replaced by the euro in 1999, the former currencies were used as National Currency Units (NCU) of the euro. These NCUs had a fixed exchange rate with the euro until December 31, 2002 when they were abolished. To process euro and NCU transactions using AutoLockbox, you must define fixed exchange relationships using the official European Union fixed rates.
Before using AutoLockbox to process euro receipts and transactions, you need to define a fixed rate relationship between the euro and each NCU in which you do business. You do not need to define fixed relationships between NCUs: Oracle's currency engine and the features that use it, such as AutoLockbox, fully support the concept of Triangulation during the euro transitional period. AutoLockbox uses fixed exchange rates for the following types of cross currency applications:
EURO to NCU
NCU to EURO
NCU to NCU
AutoLockbox uses the following field types in the bank transmission file to apply cross currency receipts:
amount_applied: The amount of the receipt to apply in the transaction currency. This is the Transaction Amount Applied shown below.
amount_applied_from: The amount of the receipt to apply in the receipt currency. This is the Receipt Amount Applied shown below.
trans_to_receipt_rate: The exchange rate between the two currencies.
The formula AutoLockbox uses to apply a cross currency receipt is shown below:
Transaction Amount Applied * Exchange Rate = Receipt Amount Applied
If the receipt and transaction currencies have a fixed rate relationship, AutoLockbox can apply the receipt regardless of whether the bank file has only one or two of these values or all of them.
If the receipt and transaction currencies do not have a fixed rate relationship, AutoLockbox must either have the exchange rate or be able to determine it to apply the receipt. For example, the exchange rate is not included in the transmission file for two currencies that do not have a fixed rate. If the amount_applied and amount_applied_from are included, AutoLockbox can calculate the missing exchange rate. If the exchange rate and one of the other values is missing, AutoLockbox checks the setting of the Cross Currency Rate Type system option and either derives the rate (and the missing value) or rejects the receipt. See: Cross Currency Rate Type.
This table shows how AutoLockbox responds to different combinations of information provided in the bank transmission file.
| Information Provided in Transmission File | Action | Result |
|---|---|---|
| Transaction Amount Applied, Receipt Amount Applied, and Exchange Rate | Validate that all values are correct. | If all values are correct, apply the receipt; otherwise, reject the application. |
| Transaction Amount Applied and Receipt Amount Applied | Calculate the exchange rate to use or derive it from General Ledger. | Apply the receipt. |
| (Fixed rate relationship) Exchange Rate, Transaction Amount Applied, or Receipt Amount Applied | Calculate the missing value(s). | Apply the receipt. |
| (No fixed rate relationship) Exchange Rate AND either the Transaction Amount Applied or the Receipt Amount Applied | Calculate the missing value. | Apply the receipt. |
| (Fixed rate relationship) Transaction Amount Applied OR the Receipt Amount Applied | Derive fixed exchange rate and then calculate the missing value. | Apply the receipt. |
| (No fixed rate relationship) Transaction Amount Applied OR the Receipt Amount Applied | Check AR: Cross Currency Rate Type profile option. | If rate is defined, use it to apply the receipt; otherwise, reject the receipt. |
See: Transmission Formats.
The Cross Currency Rate Type system option determines the exchange rate type that AutoLockbox uses to apply cross currency receipts when all of the following are true:
the receipt and transaction do not have a fixed rate relationship
the bank file does not include the exchange rate
the bank file includes either the amount_applied or the amount_applied_from (but not both)
If the Cross Currency Rate Type system option is not defined, then AutoLockbox rejects receipts matching this criteria.
To define a rate for this system option, see: Accounting System Options.
If the transmission file includes the exchange rate and the amount to apply in both the receipt and transaction currencies, AutoLockbox ensures that the amounts are consistent before importing the receipt. If the amounts are not correct, AutoLockbox rejects the receipt.
AutoLockbox ensures that the following calculations are true:
amount_applied * trans_to_receipt_rate = amount_applied_from
amount_applied_from / trans_to_receipt_rate = amount_applied
Note: AutoLockbox also rejects duplicate receipts. AutoLockbox considers receipts to be duplicates if they have the same receipt number, amount, currency, and customer number. See: AutoLockbox Validation.
You can use the QuickCash window to enter cross currency receipts and application information. The QuickCash window displays the Amount Applied and Allocated Receipt Amount fields to help you apply cross currency receipts. You can apply both manually entered and imported cross currency receipts in the QuickCash window.
Like the Applications window, the QuickCash window provides defaulting logic to help you enter information and reduce manual errors. For more information, see: Applying Cross Currency Receipts - Examples and QuickCash.
Suggestion: Define the Cross Currency Rate Type system option. This system option determines the default exchange rate type that the QuickCash window uses when the receipt and transaction currency are different and the two currencies do not have a fixed rate relationship. See: Accounting System Options.
The method your customer uses to sum payment amounts in the bank transmission file can effect whether AutoLockbox fully applies a cross currency receipt.
Consider the following example:
1 EUR = .860956 USD
Your customer has three invoices, each for 1000 EUR. The customer adds the invoice amounts and then converts the total to USD. The result is shown below:
Transaction * Rate = Amount (in receipt currency)
3,000.00 EUR * .860956 = 2,582.87 USD (rounded)
Although this method is mathematically correct, AutoLockbox calculates remittance amounts differently. AutoLockbox calculates remittance amounts using the following procedure:
Convert each transaction to the receipt currency.
Add the amounts in the receipt currency.
Remit the sum as the amount_applied_from.
The result of this method (using the values from the previous example) is shown below:
Transaction * Rate = Amount (in receipt currency)
1,000.00 EUR * .860956 = 860.96 USD (rounded)
1,000.00 EUR * .860956 = 860.96 USD (rounded)
1,000.00 EUR * .860956 = 860.96 USD (rounded)
Total = 2,582.88 USD
As you can see, the receipt amount (amount_applied_from) in the bank transmission file is 2582.87, but AutoLockbox calculates it as 2582.88. As a result of this discrepancy, AutoLockbox leaves .01 unapplied and one of the invoices remains open. To avoid situations like this, we recommend that you establish business procedures with your customers to ensure that remittance amounts are calculated using the same method as AutoLockbox.
Rounding differences are not uncommon when processing cross currency receipts between currencies. These errors occur because there are usually more decimal places defined for an exchange rate than for the standard precision for your functional currency. When a receipt amount is multiplied by an exchange rate and then rounded to match your standard precision, the result can be slightly different from the transaction amount specified in the transmission file.
Receivables records rounding errors in the Cross Currency Rounding Account. You define a Cross Currency Rounding Account in the System Options window. See: Accounting System Options.
Due to fluctuating exchange rates, it is possible to incur either a foreign exchange gain or loss whenever you apply a cross currency receipt. These gains and losses occur when the exchange rate between the two currencies changes after the invoice is created but before the receipt is applied. For more information, see: Calculating the Foreign Currency Exchange Gain or Loss.
Receivables records foreign exchange gains and losses in the Realized Gains and Realized Losses accounts. You define these accounts in the System Options window. See: Accounting System Options.