Master currency conversion table with starting and ending rates

Description

This requirement describes a table or other mechanism where the finance team can enter conversion rates for various currencies against the primary currency in the system. This capability enables planning and reporting in specific currencies and can display a roll-up in a master currency.

Example Use Case

Scenario: A global retail chain with operations in over 20 countries uses CPM software for financial planning. Given the vast geographical presence, it needs to deal with multiple currencies in its financial reporting. As such, current currency rates, which may fluctuate over time, may not reflect the actual economic reality at the time transactions were executed.

Solution: Having a CPM system that can manage a master currency conversion table with starting and ending rates, the company can establish a more accurate financial representation. They can use the beginning, end, or a monthly average to establish consistency for planning.

Considerations

The table described here generally has currencies listed as a row and time as a column, allowing the user to manipulate the rates as time does on, and retain historical rates for any given period. We often see planning rates, reporting rates, average rates, and so on as a method to make calculations simpler and more uniform across the platform. It is also simplified that all a user must do at the beginning of a period is to enter a few values into the table to make currency conversion work. No need for overbuilt API calls or constantly updating currency conversions.

For most planning situations, this is sufficient as currencies to not shift enough inside a given month to make a material impact on the plan. There are exceptions, such as working in a hyper inflation environment. That requires more meticulous management of currency and may require more granular controls on currency rates.

Questions to Ask a Vendor

• Updating Conversion Rates: How do we keep the currency rates up to date? Is any of it automated?
• Historical References: Can your system store and refer to historical currency rates for financial reporting purposes?