Understanding Accounts Receivable Drafts in a Foreign Currency

In most countries, a draft is a promise to pay a debt. Many areas of the world use draft processing, although it might be referred to as something other than draft processing. For example, in Asia Pacific, the draft process is commonly used for post-dated checks. In the U.S., it is used for credit card payments.

You can process drafts in a foreign currency if the transaction currency of the invoice is the same currency as the draft. The transaction currency of an invoice determines the currency that is used throughout the draft process. If the transaction currency of an invoice is foreign, you must print, remit, and collect it as a draft in a foreign currency. For this reason, you cannot process drafts in an alternate currency.

Depending on whether a foreign currency draft must be accepted by the customer, you can process drafts either manually or automatically.