Business Central records each transaction in its original currency, then converts it to the company’s local currency (LCY) at the applicable exchange rate and calculates exchange gains and losses as rates change. Take a US company that pays a euro supplier in March and collects from a UK customer in April. Its general ledger stays in USD, and every foreign amount is still on the record.
Below, we go through how currencies, exchange rates, adjustments, and reporting work, and where you will need extra setup or an extension.
How does Business Central handle multi-currency accounting?
Each foreign-currency document is stored in its original currency and converted to local currency at the rate in effect, so the general ledger always balances in one currency. When rates move, a periodic adjustment updates the local-currency value of eligible open balances.
In practice, it goes like this:
- Set up currencies and exchange rates. Every conversion depends on currency codes and date rates.
- Assign currencies. A currency code on a customer, vendor, or bank account becomes the default for new documents.
- Record transactions. Sales invoices, purchase invoices, and payments carry both the foreign amount and the local equivalent.
- Post. The general ledger entries are in USD, and the ledger entries keep the original currency amount.
- Adjust open balances. A periodic process revalues eligible outstanding items at the current rate.
- Review gains, losses, and reports in the general ledger and financial statements.
Here’s an example: A US company invoices a customer €10,000. The customer card carries the euro code, so the sales invoice defaults to euros. At posting, Business Central converts the invoice to USD at the applicable rate, and accounts receivable shows the euro balance next to its USD value. What happens when the rate moves comes up further down.
How do you set up multiple currencies in Business Central?
You define the local currency, create the foreign-currency codes, enter exchange rates, and check that the posting accounts exist. This is standard configuration and needs no customization.
The LCY code is set in General Ledger Setup, and most US companies use USD. Each foreign currency is created on the Currencies page with a code and description. Rates go on the Currency Exchange Rates page with a starting date, and a rate stays in force until a later one takes over. Each currency also has rounding precision settings and general ledger accounts for realized and unrealized gains and losses. Confirm those before posting any foreign-currency activity. Assigning a currency code to a customer or vendor makes documents default correctly, and it’s worth reviewing posting groups and general ledger setup so entries land in the right accounts.
Rates can be entered by hand or pulled from a supported exchange-rate service, depending on your configuration. Creating a currency doesn’t turn on automatic updates. Whether rates refresh on their own depends on the service, the connection, the update frequency, and your setup, so someone in finance should own rate maintenance. Microsoft Learn has the current procedure under Business Central currencies.
How does Business Central process foreign currency invoices and payments?
A foreign-currency invoice is posted at the exchange rate for the posting date and recorded in both the foreign and local currency. When a payment is applied, the local-currency value at settlement can differ from the value at invoicing, and that difference becomes a realized currency gain or loss.
On the receivables side, a user creates a sales invoice in the customer’s currency. Posting debits accounts receivable and credits revenue in USD at the converted amount. A purchase invoice in the vendor’s currency posts to accounts payable the same way. Payments work alike: the bank or payment document is converted at the applicable rate and applying it to the open invoice triggers the settlement calculation.
A simple example, with illustrative rates:
|
Event |
Euro amount |
Rate (USD per EUR) |
USD value |
|
Invoice posted |
€10,000 |
1.08 |
$10,800 |
|
Payment settled |
€10,000 |
1.10 |
$11,000 |
|
Difference |
€0 |
0.02 |
$200 gain |
The customer owes €10,000 the whole time, but the cash received is worth $200 more than the receivable originally recorded. That’s before bank fees or other adjustments, and the actual result depends on the rates applied, the posting sequence, the settlement details, and your configuration.
How does Business Central calculate realized and unrealized currency gains and losses?
Realized gains and losses arise when a foreign-currency transaction is settled. Unrealized ones come from rate changes on balances that are still open. Business Central calculates realized amounts during settlement and unrealized amounts through its currency adjustment process.
|
Realized |
Unrealized |
|
|
When recognized |
When an invoice is settled by payment |
When open balances are adjusted, such as at period end |
|
Cause |
Rate difference between posting and settlement |
Rate movement on items still outstanding |
|
Cash impact |
Reflected in the amount received or paid |
No cash movement yet |
|
Mechanism |
Posted automatically during application |
Posted by the Adjust Exchange Rates process |
The Adjust Exchange Rates batch job looks at eligible open entries, such as customer and vendor ledger entries and bank accounts. It compares their local-currency value with the value at the adjustment rate and posts the difference to the unrealized gain or loss accounts defined for each currency. The adjustment rate comes from the Currency Exchange Rates page, which can hold one that’s separate from the standard rate. Which entries are included depends on the currency, the options you select, and the account type.
Before you post an adjustment, confirm that rates are current for the adjustment date and that you’ve picked the right currencies and posting date. Check the unrealized gain and loss accounts too and make sure subledgers reconcile to the general ledger. An adjustment is a valuation entry, not a cash gain or loss.
What is currency revaluation in Business Central?
Currency revaluation is the periodic restatement of open foreign-currency receivables and payables at current exchange rates. In Business Central, the adjustment process described above does this job.
A euro receivable booked at $1.08 may be worth $1.09 per euro at month-end. Without an adjustment, the balance sheet still shows the older value. Running adjustments at month-end and year-end keeps receivables and payables closer to current values. When and how to revalue depends on your accounting policy and the reporting standards that apply to you, including US GAAP where relevant, so confirm it with your accountants. Business Central supplies the mechanism, but the software doesn’t make you compliant by itself.
Back to the example and say the month-end rate is 1.09. The open invoice is now valued at $10,900, an unrealized gain of $100 against the original $10,800. If the customer later pays at 1.10, the remaining $100 is recognized as realized, because Business Central accounts for the adjustment already posted.
Can Business Central generate financial reports in multiple currencies?
Yes, with the right configuration. Business Central reports in local currency by default, and you can set up an Additional Reporting Currency (ACY) to show amounts in a second currency.
Four terms are easy to mix up. The transaction currency is the currency of a single document, such as a euro invoice. The local currency (LCY) is the one your general ledger is kept in. The additional reporting currency (ACY) is an optional second currency in which general ledger amounts are also recorded, set up in General Ledger Setup. The consolidation currency is the one you use when combining multiple companies or subsidiaries.
ACY doesn’t replace a full consolidation process and won’t meet every foreign reporting requirement. Consolidation and foreign-currency translation need their own configuration and accounting decisions. For reporting, finance teams commonly use general ledger reports, account schedules, financial statements, and analysis views. Power BI can add analysis on top, though multi-currency accounting doesn’t depend on it.
What are the benefits for US businesses?
Foreign-currency activity lives in one system with consistent rules. Every document stores the transaction currency, the rate, and the USD value. Open receivables and payables stay visible in their original currencies, and aging and open entries can be reviewed in both the original currency and USD.
Period-end work gets easier too. One adjustment process applies rates across eligible entries and posts to defined accounts, which cuts down on manual journals. Conversion happens at posting, so nobody converts amounts in spreadsheets, and reports draw from a single source of USD figures.
What are the limitations of multi-currency accounting in Business Central?
Standard multi-currency accounting doesn’t need extensive customization, but a few things need attention.
Business Central provides the rate tables, while your organization decides where rates come from and keeps them current. Configuration mistakes can misstate results: a wrong currency code, missing gain and loss accounts, or the wrong posting group. Consolidation and translation across several companies and currencies call for extra design. Hedging and forward contracts may need extensions or an external system, and so may some statutory or custom reports. Test adjustments and period-end procedures in a sandbox before using them in production.
Is Business Central suitable for businesses that operate in multiple currencies?
For most US small and midsize businesses with overseas suppliers or customers, yes. Importers, exporters, distributors, manufacturers, and professional services firms can generally handle several currencies natively.
Businesses with complex intercompany structures, specialized treasury needs, or heavy consolidation and statutory reporting should look more carefully. Some questions to start with:
- Which currencies do we transact in, and how many customers and vendors use each?
- Where will exchange rates come from, and who maintains them?
- How often do we revalue open balances, and under what policy?
- Do we need reporting in a second currency?
- Do we run multiple legal entities with different functional currencies?
- Do we need hedging, forward contracts, or other treasury tools?
- What do auditors or lenders require in our reporting?
How can an implementation partner help?
An experienced partner lowers the risk of configuration errors and helps match the system to your accounting policies. They typically start by reviewing your current currency and accounting processes, then configure currencies, exchange rates, and posting settings. From there they validate the sales, purchasing, settlement, and adjustment workflows, and test realized and unrealized gains and losses against examples with known answers. They also design month-end and year-end procedures, evaluate exchange-rate integrations and reporting needs, and train your finance team.
If your business transacts in multiple currencies, a conversation with an implementation partner can show how this map to your workflows. Speak with a partner about your multi-currency accounting requirements.
Frequently asked questions
How does Business Central handle multi-currency accounting?
Users post documents in foreign currencies, and Business Central converts them to local currency using dated exchange rates. Ledger entries keep the original currency amount. Settlements produce realized gains and losses, and a periodic adjustment handles unrealized differences on open balances.
Can Business Central automatically update currency exchange rates?
Only if an exchange-rate service is configured. Rates can be entered by hand or retrieved through a supported service. Confirm the source, the connection, and the update frequency during setup, since creating a currency alone doesn’t guarantee updates.
How does Business Central calculate foreign exchange gains and losses?
At settlement, it compares the local-currency value of the invoice at posting with the value of the payment and posts the difference as a realized gain or loss. For open items, the Adjust Exchange Rates process posts the unrealized difference.
What is the difference between realized and unrealized currency gains and losses?
Realized amounts occur when a foreign-currency item is settled and reflect an actual difference in value received or paid. Unrealized amounts come from rate changes on balances still open at a reporting date. They’re valuation adjustments with no cash movement yet.
Can Business Central generate financial reports in multiple currencies?
Yes, with configuration. Reports run in local currency by default, and an additional reporting currency records general ledger amounts in a second currency. Consolidating companies with different currencies is a separate process with its own configuration and accounting review.
How do you adjust exchange rates in Business Central?
Make sure the rates on the Currency Exchange Rates page are current for the adjustment date. Then run the Adjust Exchange Rates process, choose the currencies, dates, and posting options, and review the entries it creates. Timing follows your accounting policy, typically month end and year end.
Does Business Central support international customers and vendors?
Yes. Customer and vendor records can carry a currency code, and documents default to it. Transactions are recorded in the foreign currency and converted to local currency, with both amounts visible in the ledger entries.
Get in touch with Business Central Partner about your multi-currency accounting requirements. We’ll review your currencies, exchange-rate sources, and period-end process and outline how Business Central can support them.
