Accounting in Foreign Currency in Retail: From Goods Receipt to Settlement with Suppliers

In modern retail and wholesale trade, most imported goods are purchased in foreign currencies (US dollars, euros, Polish zlotys, etc.), while sales to customers in Ukraine and the fiscalization of payments are legally conducted exclusively in the national currency — the hryvnia. During periods of exchange rate fluctuations, retailers face a challenge: how to maintain profit margins, avoid losses when receiving new shipments, accurately record settlements with business partners, and quickly adjust retail prices in inventory.

• How to record goods received under an invoice denominated in foreign currency when payment is made in hryvnias;
• how to link the selling price to the exchange rate;
• which exchange rate is used to calculate the cost of remaining inventory;
• how to manage settlements with suppliers to avoid exchange rate discrepancies in the balance.

To establish transparent accounting in Torgsoft, the concepts of national currency, purchase currency, analysis currency, and exchange rates are clearly distinguished.

• System National Currency — the primary monetary unit used for financial and inventory accounting, calculating the company's balance, processing cash transactions, and generating fiscal receipts (the hryvnia by default).

• Purchase Currency (Document Currency) — the currency in which the supplier issues an invoice or incoming goods document (for example, USD or EUR).

• Analysis Currency — the currency (US dollar by default) used for financial analysis and automatic calculation of equivalent selling prices.

• Exchange Rate — the value of a foreign currency relative to the hryvnia, recorded in the system for a specific date.

Configuring Settings in the Software

1. Setting the National Currency: in Settings -> Parameters -> Accounting, select «Hryvnia» in the National Currency field.

2. Recording Exchange Rates: in Payment -> Exchange Rate, add the current currency buying and selling rates. Rates are entered from the business owner's perspective (the selling rate is used to determine the equivalent selling price).

3. Automatic Calculation of Currency Equivalents: in Settings -> Parameters -> Financial Analysis, you can enable the Automatically Calculate Selling Price Equivalent in Analysis Currency option.

The process of receiving goods purchased in foreign currency into inventory involves creating an incoming invoice, recording the purchase exchange rate, and calculating the retail price.

Step-by-Step Procedure in Torgsoft

1. Creating an Incoming Invoice. Open Document -> Goods Receipt, create a new document, and select the supplier.

2. Setting the Currency and Exchange Rate. In the Currency field, select the foreign currency of the invoice (for example, US Dollar). The Exchange Rate to UAH field will then appear. Enter the exchange rate applicable on the date the goods are received (or click the button to retrieve the latest exchange rate from the system).

3. Purchase Price Entry Mode. For foreign currency invoices, the Purchase Price Entry setting is available:

•   In Invoice Currency: the purchase price is entered in the foreign currency, and the hryvnia price is calculated automatically using the invoice exchange rate.

•   In National Currency: the purchase price is entered in hryvnias (if the supplier's original documents are denominated in hryvnias), and the foreign currency price is calculated using the exchange rate.

4. Calculating Retail and Wholesale Prices. After entering the purchase price, the software applies the specified markup percentage for the product category and calculates retail and wholesale prices in hryvnias.

5. Importing Products from Excel Files. When importing an incoming invoice from Excel (Document -> Goods Receipt -> Import), you can import both purchase prices in foreign currency and equivalent retail and wholesale prices. If the file does not contain a hryvnia price, the software calculates it from the foreign currency equivalent using the incoming invoice's exchange rate.

For international purchases, the final cost of goods includes not only the supplier's price but also additional expenses: customs duties, international and local shipping, and bank currency conversion fees.

In Torgsoft, the Invoice Expenses tab of the goods receipt document provides three types of expenses:

1. Financial Invoice Expenses. These are entered as amounts in hryvnias or foreign currency and recorded through a separate financial document (using a cash register or bank account). If the Include in Product Cost setting is selected, the software distributes the amount proportionally across all invoice items, increasing their recorded cost.

2. Expenses as a Percentage of the Invoice (Discounts or Markups). These are specified as a percentage of the invoice amount.

3. Product Expenses in Foreign Currency. These are entered directly in the foreign currency. Depending on their accounting treatment, expenses are divided into:

•   Include in Product Cost: increases the additional cost of each unit of goods in inventory.

•   Include in Settlements with Supplier: increases the amount owed to the supplier and is added to the purchase price.

•   Do Not Include: these are treated as general business financial expenses in profit analysis.

After entering all expenses, use Recalculate Prices in Invoice to automatically adjust product costs and retail prices.

If goods are purchased in foreign currency but sold in hryvnias, exchange rate fluctuations reduce actual profits when retail prices remain unchanged.

To respond quickly to exchange rate changes without manually editing every product record, Torgsoft provides automatic repricing tools.

Method 1. «Calculate Retail and Wholesale Prices Based on Markup and Exchange Rate» Mode

This mode is available under Warehouse -> Calculate Retail and Wholesale Prices Based on Markup and Exchange Rate.

Procedure for bulk repricing:

1. Use filters to select a group of products (by product category, manufacturer, or supplier).

2. Select the Calculation Method:

•   Based on Purchase Price: recalculates the selling price from the original purchase price in foreign currency using the new exchange rate.

•   Based on Equivalent Price: recalculates the selling price based on the recorded equivalent price in foreign currency. On the Price Equivalent in Foreign Currency tab of the product record, specify the foreign currency price (for example, $25) and select the Always Calculate checkbox. When the official or analytical selling exchange rate changes in the system, the product's retail price in hryvnias is automatically recalculated based on the recorded foreign currency equivalent.

3. Select the Exchange Rate (Today Only or Nearest Available).

4. Select the Price Change Method:

•   Immediately: new prices are applied to inventory immediately.

•   Repricing Document: creates a repricing document that takes effect after approval by the manager.

5. Click Refresh (F5). The software will calculate new retail and wholesale prices and display the difference from the current prices.

Method 2. Repricing Through «Inventory Balance Analysis»

Under Analysis -> Inventory Balance Analysis, use the Change Product Price or Purchase Exchange Rate  action to change the purchase exchange rate in bulk for the remaining inventory from a selected supplier. The software automatically creates adjustment documents (a return to the supplier at the old exchange rate and a goods receipt at the new rate), updating purchase and retail prices.

The goods and cash balance with suppliers is maintained in the currency in which the goods were delivered. Outstanding balances can be viewed under Payment -> Balance with Partners.

Payment Scenarios and Procedures

Scenario A. Paying a Foreign Currency Invoice in Hryvnias

In business operations, companies often pay suppliers in hryvnias from their bank accounts at the equivalent exchange rate.

1. Under Warehouse - Incoming Invoice Register, specify the supplier in the filter and find the required incoming invoice. Click Record Payment.

2. In the payment entry window, select Currency - Hryvnia and the appropriate cash register or bank account.

3. Enter the amount in hryvnias. The Equivalent Amount will be calculated automatically in the invoice currency.

4. The software automatically records the hryvnia amount in the hryvnia account and simultaneously reduces the amount owed to the supplier in the invoice currency by the specified equivalent.

Scenario B. Purchasing Foreign Currency and Paying from a Foreign Currency Account

If payment is made directly in foreign currency:

1. If you need to record the conversion of money from hryvnias into foreign currency, go to Payment - Currency Exchange and specify the amount in hryvnias to be deducted from the hryvnia account/cash register, the buying exchange rate, and the foreign currency account/cash register to which the purchased currency will be credited.

2. To record the payment, go to Warehouse - Incoming Invoice Register, select the required invoice, select a foreign currency cash register or bank account, and deduct the amount in foreign currency to pay the supplier.

The cost calculation method selected under Settings -> Parameters -> Accounting determines how exchange rate fluctuations affect the cost of remaining inventory and gross profit.

Torgsoft provides specialized analytical reports for systematic monitoring of foreign currency inventory and cash flows:

1. Consignment Supplier Product Sales Analysis (Analysis -> Consignment Product Sales Analysis): allows you to view the amounts of goods received, returned, and sold, as well as the current outstanding balance owed to each supplier, separately for each purchase currency.

2. Foreign Currency Sales Report (Report -> Foreign Currency Sales Report): displays foreign currency receipts by cash register and bank account for the selected period, with totals in the foreign currency and their hryvnia equivalents.

3. Product Movement Analysis by Delivery Batch (Analysis -> Product Movement Analysis by Delivery Batch): allows you to track the movement of a specific batch from its purchase at the applicable exchange rate through to its complete sale, including calculations of the revenue received and net income.

Summary

Foreign currency accounting in Torgsoft allows retailers to combine Ukrainian legal requirements for settlements in hryvnias with the economic realities of purchasing imported goods. Configuring foreign currency equivalents, using automatic exchange-rate-based repricing, and accurately maintaining supplier settlements in the purchase currency help protect working capital against inflation risks and ensure accurate calculation of the store's financial results.