Question

Fixed currency rate contract with bank

  • 19 May 2021
  • 2 replies
  • 160 views
J
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Userlevel 3
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My customer has hedge contracts with the bank.

The accounting currency being SEK and their main purchase currency being USD they safeguard themselves against currency rate fluctuations by frequently securing  different USD amounts at negotiated rates with their bank. These contracts are for a settled total amount and has an end date. They have overlapping time intervals, a new contract is made before the previous is ended.

The result being that when they pay suppliler invoices they use these different contracts to ensure the best possible rate for every payment. Not a problem, but:

...as the amount on one contract runs out one supplier invoice payment may be based on amounts from two different fixed rate contracts, One part of the payment is at one currency rate and the remaining amount is paid at another rate.

This is a fairly common issue  - how do IFS customers usually handle this?

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2 replies

L
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Userlevel 6
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Hello Jonas, 

Hope you are well.

 

I have a similar issue regarding Hedge Contracts. 

 

When you say  “The result being that when they pay suppliler invoices they use these different contracts to ensure the best possible rate for every payment.” it’s because your hedge contract is registered under IFS? How you do it? 

 

I need to register those contracts and attach to specific suppliers in order to use the contract fx rate instead of the updated system one. 

 

Any thoughts? 

 

Thanks!

A
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Userlevel 7
Badge +16

I am not sure how you control used contract amount - and how you post the payment.

If you control currency contracts manually, you should ensure each payment order belongs to single contract - to make sure single rate will be used for entire order. You can divide payment proposal into several parts, if needed.

One invoice can have multiple installments defined and be paid in different orders.

Once you create your payment order, you can enter payment acknowledgement with currency rate as per contract condition. this will work if you post payment orders from Acknowledge payment window.

If you are using mixed payment to post payment orders, you should ensure correct rate is used on mixed payment transaction (of “Acknowledge supplier payment order” transaction type).

I am not sure (I am using a bit old IFS version) if there’s something in the system supporting hedging on supplier payments. 

Regards, Adam
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