Suppose you own company sourcing products from China and selling these in Europe. You will face the situation when you must pay suppliers in RMB and get payments from consumers in Euros. It often becomes hectic for a business to deal with multiple currencies.
Is international goods and services trade a routine for your business? Then choosing 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 benefit of this account type is that the account details, e.g., account number, beneficiary name, and SWIFT code remain the same for every transaction. Currently, most banks offer businesses the option to open 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 costs while making or receiving payments in different currencies. It means cross-border transactions would become easier and more beneficial with multi-currency accounts.
How to effectively manage a multi-currency business account?
When it is about to make the most out of a multi-currency business account, you must manage it effectively. Initially, things can be a bit complicated because of the volatile nature of foreign exchange.
So, here are some effective tips that you must consider to manage your multi-currency account successfully:
Understand the basics of multi-currency accounting
With globalization in full swing, businesses have partners, investors, suppliers and customers globally. To manage a multi-currency account, learning about its basics is key. Spare your time to learn basics, including:
- How multi-currency account usually works?
- What is the role of the base currency in your multi-currency business account?
- Which currency is associated with each ledger on your account chart?
- Multi-currency in GL entry, and more.
Learning such important yet basic things will let you understand how multi-currency business accounts work.
Update your currency exchange rates regularly
We all understand the fact that the conversion rates of currencies are dynamic. These changes very quickly. So, handling the currency exchange rates is also important for effectively managing a multi-currency business account.
There are two different ways to handle currency exchange rates. These generally include:
· Record exchange rates in real-time for your transactions
Firstly, you can start by adding real-time exchange rates in every transaction. Fetch the latest currency exchange rate through a third-party service. Or enter the real-time rate in the transactions manually.
This practice will help you record exchange loss or gain at every payment entry.
· Set a fixed exchange rate for a certain period.
Secondly, you can fix a specific exchange rate for a period to post your entire transactions accordingly. Then reevaluate your liabilities and assets at the end of the specified period. This will help you create a detailed currency exchange record for better account tracking.
Reevaluate the exchange rate periodically
It’s important to reevaluate your assets and liabilities periodically. You can set your period quarterly, monthly, or yearly based on your needs and preferences. Then post an entry with the exchange rate reevaluation title in your record.
Verdict
Ensure to put into practice these tips mentioned above to manage your multi-currency account. So, enjoying the perks of a multi-currency account can become easier.
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