Multi currency solutions are needed when a company regularly deals with foreign currencies in its international business. Here we show you which multi currency solutions are available and how they help companies to save costs and conduct business more efficiently.
What is multi currency?
Multi-currency refers to financial transactions in one or more foreign currencies. For companies that operate internationally, multi-currency accounts and multi-currency systems play an important role. They simplify transactions, reduce costs and help finance managers keep track of cash flow.
Companies can easily keep track of exchange rates when doing business in foreign currency with such systems and have all transactions automatically converted into their local currency.
What is a multi currency account?
A multi currency account is an account with a provider that offers its customers bank accounts in different currencies. For example, a British company can open a British bank account with a multi-currency account provider, an account in euros, an account in US dollars and an account in Swiss francs - depending on which currencies it has to deal with.
This way, it can pay its business partners in other countries in their local currency, and its international customers can pay the company in their local currency.
Many multi-currency account providers offer lower currency exchange fees than banks, so that income can be transferred cheaply from a foreign currency account to the local currency account.
What is a multi currency system?
A multi-currency system is accounting software that can handle different currencies. The software makes it easy to carry out transactions in foreign currency and displays the exchange rates transparently so that you can see how much the transaction is in the local currency.
Often, multi-currency systems also offer the possibility of carrying out several simultaneous transactions in foreign currency, for example if the same amount in local currency is to be transferred to different accounts with foreign currency.
In addition, a multi-currency system offers functions with which invoices in foreign currencies can be automatically converted into the local currency and booked in the accounting system.
Purpose of a multi currency system
The aim of a multi-currency system is to clearly present transactions in foreign currencies and make them traceable. The costs incurred for transactions in foreign currencies must also be taken into account in accounting, which is why a multi-currency system must also record the transaction fees.
The system is also designed to provide finance managers with important information, for example the current status of exchange rates. This is important, for example, when a company has to pay a large amount in foreign currency. Depending on the exchange rate, it may be worthwhile to make the transfer immediately or to wait until the exchange rate is more favourable.
Thus, the multi-currency system also has the task of supporting companies in reducing costs by processing transactions in foreign currencies as cheaply as possible.
Effect of a multi currency system
Multi-currency systems help to save costs on the one hand and simplify international financial transactions on the other. Nowadays, companies that are active worldwide can hardly avoid such a system if they want to work economically.
Investing in a suitable tool can therefore make a lot of sense, depending on the type of business the company does. Agicap's cash flow management software, for example, also offers multi-currency functions: It retrieves account transactions from accounts abroad and converts them into the local currency so that the cash flow is always displayed in the "usual" currency.