Automate your foreign currency translation rules to eliminate foreign currency driven variables from your reporting

Get a Handle on Your Foreign Currency Impacts in Your Financial Reporting

One of the things I’ve learned implementing SAP Business Planning and Consolidation (BPC) software across companies of all sizes in many different industries is that business requirements — especially as it relates to consolidated financial statements and reporting — are generally very much the same.

One example is removing the impact of foreign currency fluctuations from an analytical perspective. Whether you’ve got one foreign entity or over a thousand, finance and accounting departments want the ability to measure financial results without having impacts caused by changing FX rates muddying the water. Are the results of an over-performing entity being hindered by a weak U.S. Dollar*? Is an under-performing company looking better than they actually are because of a strong U.S. Dollar? To answer these types of questions and measure a company’s true operational performance, you need to be able to split out FX-driven variances in reporting.

In order to meet these foreign currency reporting requirements in their legacy environments, companies frequently maintain one of the following:

    1. a very complex, heavily manual, giant Excel workbook that addresses the reporting needs, but most likely uses some bad formulas, or;
    2. a very simple Excel file that only approximates the currency impact, at best.

SAP Business Planning and Consolidation (BPC) helps address the generation of data to meet these reporting requirements out of the box using Foreign Currency Translation business rules that can be used to create as many categories (versions) of data that are required. Business users who own and maintain the system have the ability to update system parameters that will drive the rate at which the data is translated and then generate the results in a matter of minutes by executing jobs called Data Manager Packages.

Need to see Actual results at Budget rates? How about Forecast at Budget rates?  Or Actual current period at prior year same period rates? Yes, SAP BPC can handle those and more.

Some things to consider when setting up your SAP BPC system to handle these requirements:

  • Do you need to see a full balance sheet or will an income statement be sufficient? Many times Balance Sheets have accounts that are set to translate at historical rates and/or are eliminated. In addition, does Retained Earnings need to roll from one period to the next? The system may need to be set up to copy data for these accounts to the FX Categories, or certain other jobs may need to be executed within those FX Categories to carry forward retained earnings or post current year net income to current year retained earnings in addition to executing the Foreign Currency Translation rules.
  • Do you want to see the full translated balance or do you want to only see the difference? For example, do you want to see the full Actual USD balance calculated at the Budget rate, or do you only want to see the USD difference between the Actual and Budget rates? The system can be set up to handle either/or, but a decision needs to be made consistently across FX categories or you risk confusing reporting users.
  • How many FX Categories do you need? Sure, you may think you need to see current year Actual at last year’s Budget rates, but consider who may really use that for reporting and why? Many times we can over-complicate reporting for users by simply giving them too much to choose from. Find the right balance between making their lives easier by generating the data for them and providing an over-abundance of data.

There are many benefits from using SAP BPC to handle the creation of the data to be used for FX impact reporting, including:

  • An automated solution more consistently generates results that you can rely upon.
  • Updates to rates are reflected in reporting at the push of a button, not going back through mountains of spreadsheets; saving your users valuable time.
  • Increased insight into entity-level performance, especially for corporations only looking at FX impacts at higher levels of their reporting structures.

So, how much longer are you going to keep spending hours and hours updating your FX workbooks when you could be using SAP BPC to do the work for you? To learn more about SAP BPC and how it can help your finance team, download our Faster Close white paper to get started on your journey.

*Could be any reporting currency, US Dollar was used as an example for a US-based company.

NTT DATA Business Solutions
NTT DATA Business Solutions

Our experts are keen to stay up to date with new developments and always share their insights, knowledge and opinions from all around the world. They cover a wide range of IT and business-related topics, including SAP and industry expertise as well as management issues. Most of them have gained many years of experience in the area of SAP - always close to the customer. That’s why they know the requirements of the market, of our customers and their customers’ customers/ partners. Get inspired and contact us if you would like to talk to them directly.

Contact Us
Contact Us

Have questions? Please contact us.