Foreign currency transactions are frequent for companies that transact business in Tanzania with foreign suppliers, foreign customers, imported goods, exported products, and foreign currency payments. Foreign currency transactions can be handled through TallyPrime, where firms can keep a base currency, create foreign currencies, set exchange rates depending on the date, and transact in different currencies.
The Importance of Foreign Currency
For example, a company in Tanzania may buy products from a foreign supplier using USD but keep their accounting transactions in their own home currency. Or an exporter can bill their international customers in USD or any other foreign currency.
The issue is not only about entering the transaction value in foreign currency but also knowing the exchange rate and how it impacts the outstanding balances and the accounting books.
Multi-currency accounting functionality in TallyPrime offers a systematic approach to dealing with this issue.
Setting Up the Currency in TallyPrime
Prior to accounting for foreign currencies, there is a need to set up an appropriate currency in TallyPrime.
The organisation will use a primary currency that is considered as its base. Additional currencies are set up after this step.
A currency master can include:
- Currency symbol and formal name
- ISO currency code
- Decimal places
- Relevant currency configuration
It helps the organisation get started in accounting for different currencies.
Manage Exchange Rates
Exchange rates play a pivotal role in foreign currency accounting due to the possibility of fluctuation of value in relation to the base currency.
Using TallyPrime, users can set exchange rates according to a particular date. This makes it easier for companies to use the applicable rate during transactions rather than using the same exchange rate for all transactions.
For instance, a Tanzanian company buying goods from a supplier in USD can use the exchange rate that applies to that particular date.
Record Purchases And Sales
After setting up the currencies and exchange rates, companies are able to enter their purchase and sales transactions in the currency that is necessary.
The purchase in a foreign currency may reflect the transaction of the supplier in the transaction currency, but also its value in the base currency of the company.
Likewise, purchases in foreign currency and invoices in foreign currency may be recorded.
This feature will be of great help to Tanzanian companies dealing with international companies.
| Business activity | Foreign currency requirement |
| Import purchase | Record supplier transaction and applicable exchange rate |
| International sale | Invoice customer in the required currency |
| Foreign currency payment | Account for the transaction using the relevant rate |
| Foreign currency receipt | Record customer receipt and resulting exchange difference |
| Financial review | View relevant information in base or other currencies |
Understand Forex Gain Or Loss
Exchange rate fluctuations might result in variations between the initial value and the revised value at the time of adjusting the foreign currency transactions.
Such a variation may lead to either gain or loss from the foreign currency transactions.
The TallyPrime application enables automatic calculation of forex gains or losses, taking into account the exchange rates applicable for foreign currency transactions. Account entries can be made using the accounting workflow feature.
It is essential to understand the above difference because the foreign currency value need not change.
Keep Balances Accurate
It is essential to constantly update foreign currency balances, especially when invoice payments have not been settled.
In case the exchange rate changes and there are still open customer balances or supplier balances, the amount in base currency also changes.
TallyPrime has provisions to deal with foreign currency balances and also transfer balances forward so that foreign exchange transactions are not left out of the books of accounts.
It becomes easier to reconcile foreign currency balances for accountants.
Print Foreign Currency Invoices
International customers may require foreign currency invoices where the transaction amount is shown in the foreign currency.
TallyPrime software provides the facility of printing invoices in foreign currency. The invoice displays the transaction amount in foreign currency along with base currency details.
It will help maintain consistency of transactions entered in the accounting system and the documents issued to the customers.
Review Currency Reports
While recording a transaction is one thing in foreign currency management, another important aspect for businesses is transparency of accounting data.
TallyPrime enables viewing the report in either base currency or other currencies. It may come in handy for the accounting team to analyse the effect of foreign currency transactions on the accounting data.
For a business based in Tanzania, it is far better than calculating and managing foreign currency transactions separately using spreadsheets.
Why Businesses Need A Structured Process
The foreign currency accounting process becomes complicated in relation to increased transactions. The manual accounting process, variable exchange rates, and separate Excel sheets make the whole process cumbersome.
An organised process through the use of TallyPrime will aid in ensuring all the above activities are incorporated. Currency masters will be kept, exchange rates will be updated, foreign currency transactions recorded, and accounts viewed.
The accounting treatment and reporting requirements may need to be reviewed depending on the business environment.
Saali Solutions: Tally Software Partner in Tanzania
Experience Tally in Tanzania at the best pricing with Saali Solutions. We offer total solutions and services for Tally software for businesses, ranging from implementation and configuration to support services and help with accounting software. If you require foreign currency accounting, please talk to us about setting up your TallyPrime.
Get in touch with our team today!
- Email Address: sales@amd.co.tz
- Phone Number: +255 789 874 466
Conclusion
In Tanzanian companies engaging in international business, it is not just the conversion of currency that is required. These businesses require an efficient system to record transactions, exchange rates, forex differences, invoice creation and viewing financial records.
The multi-currency functionality of TallyPrime allows for such tasks within the accounting procedure.
Read more:
Why Businesses in Tanzania Are Moving to Cloud-Based Accounting Solutions
How Tanzanian Businesses Can Reduce Accounting Errors Using TallyPrime
Top Advantages of Tally Prime for Small-Medium Size Businesses in Tanzania
Frequently Asked Questions (FAQs)
Can TallyPrime record transactions in foreign currency?
Yes, transactions can be recorded in the base currency or the foreign currency configured in TallyPrime.
Can exchange rates be updated for different dates?
Yes, exchange rates can be updated for specific dates, enabling the company to maintain the rate according to its transaction needs.
Does TallyPrime calculate forex gain or loss?
Yes, TallyPrime automatically computes forex gain/loss from the exchange rates maintained for foreign currency transactions.
Can foreign currency invoices be printed?
Yes, invoices can be printed with foreign currency information, including the equivalent base currency amount.
Can reports be viewed in foreign currency?
Yes, reports can be viewed in the base currency or the foreign currency configured in TallyPrime.