Overview: Exchange rates are essential for businesses that deal with multiple currencies. They determine how much of one currency you can get for another. In NetSuite, managing exchange rates helps ensure accurate financial reporting and smooth transactions.
Key Terms:
- Base Currency: The primary currency your business uses for financial reporting. This is usually the currency of the country where your business is located (e.g., USD for the United States).
- Foreign Currency: Any currency that is not the base currency. For example, if your base currency is USD, then EUR (Euros) and JPY (Yen) are foreign currencies.
1. What are Exchange Rates?
- Exchange rates indicate how much of one currency you can exchange for another. For instance, if the exchange rate is 1 USD = 0.85 EUR, it means 1 US dollar can be exchanged for 0.85 Euros.
2. Setting Up Exchange Rates in NetSuite
- Manage Currencies: Go to Setup > Accounting > Manage Currencies in NetSuite.
- Add Currencies: Ensure your base currency and all foreign currencies your business uses are added.
- Input Rates: Enter the current exchange rates for each foreign currency relative to your base currency.
3. Impact on Transactions
- When you make transactions in foreign currencies, NetSuite will use the exchange rate to convert amounts into your base currency for reporting.
- Example: If you sell a product for 100 EUR, and the exchange rate is 1 EUR = 1.18 USD, NetSuite will convert that to 118 USD in your financial reports.