Lockbox and Cross Currency Receipts

You can use lockbox to import and apply receipts when the currencies of the receipt and the transaction are different.

Conversion Rate Information

Lockbox uses these field types in the bank transmission file to apply cross currency receipts between currencies that don't have a fixed rate relationship:

• Transaction Amount Applied (amount_applied): The amount of the receipt to apply in the transaction currency.

• Receipt Amount Applied (amount_applied_from): The amount of the receipt to apply in the receipt currency.

• Conversion Rate (trans_to_receipt_rate): The conversion rate between the two currencies.

When all three values are present in the transmission file, lockbox ensures that the amounts are consistent before importing the receipt, by verifying that these calculations are true:

amount_applied * trans_to_receipt_rate = amount_applied_from

amount_applied_from / trans_to_receipt_rate = amount_applied

The formula lockbox uses to apply a cross currency receipt is:

Transaction Amount Applied * Conversion Rate = Receipt Amount Applied

If the receipt and transaction currencies have a fixed rate relationship, the lockbox transmission file only requires either the Transaction Amount Applied or the Receipt Amount Applied to apply the receipt.

If the receipt and transaction currencies don't have a fixed rate relationship, the lockbox transmission file must either contain the conversion rate or be able to determine the conversion rate in order to apply the receipt.

If both the conversion rate and either the Transaction Amount Applied or the Receipt Amount Applied are missing, lockbox uses the setting of the Cross Currency Rate Type system option to either derive the rate and the other missing value or reject the receipt.

This table shows how lockbox processes conversion rates and receipt application based on different combinations of information provided in the bank transmission file:

Information Provided in Transmission File	Action	Result
Conversion Rate Transaction Amount Applied Receipt Amount Applied	Validate that all values are correct.	If all values are correct, apply the receipt. If one or more values are incorrect, reject the receipt.
Transaction Amount Applied Receipt Amount Applied	Calculate the conversion rate to use or derive the rate from general ledger.	Apply the receipt.
Fixed rate relationship: One or two of Conversion Rate, Transaction Amount Applied, Receipt Amount Applied	Calculate the missing value or values.	Apply the receipt.
Floating rate relationship: Conversion Rate Transaction Amount Applied or Receipt Amount Applied	Calculate the missing value.	Apply the receipt.
Fixed rate relationship: Transaction Amount Applied or Receipt Amount Applied	Derive the fixed conversion rate and calculate the missing value.	Apply the receipt.
Floating rate relationship: Transaction Amount Applied or Receipt Amount Applied	Refer to the Cross Currency Rate Type system option.	If the rate is defined, use it to derive the missing value and apply the receipt. If the rate isn't defined, reject the receipt.

Rounding Remittance Amounts

The method your customer uses to sum payment amounts in the bank transmission file can affect whether lockbox fully applies a cross currency receipt.

Discrepancies in Rounding Amounts

Your customer has three invoices, each for 1000 EUR. The customer adds the invoice amounts and then converts the total to USD. The conversion rate used is: 1 EUR = .860956 USD.

The result of adding the invoice amounts and converting the total is:

Transaction * Rate = Amount (in receipt currency)

3000.00 EUR * .860956 = 2,582.87 USD (rounded)

Although this method is mathematically correct, lockbox uses a different procedure to calculate remittance amounts. This procedure is as follows:

1. Convert each transaction to the receipt currency.

2. Add the amounts in the receipt currency.

3. Remit the sum as the Receipt Amount Applied (amount_applied_from).

Using the same invoices and conversion rate, the result of this procedure is as follows:

Transaction * Rate = Amount (in receipt currency)

1,000.00 EUR * .860956 = 860.96 USD (rounded)

1,000.00 EUR * .860956 = 860.96 USD (rounded)

1,000.00 EUR * .860956 = 860.96 USD (rounded)

The total is 2,582.88 USD.

The Receipt Amount Applied (amount_applied_from) as entered in the bank transmission file is 2582.87, but lockbox calculates the Receipt Amount Applied as 2582.88. As a result of this discrepancy, lockbox leaves .01 unapplied and one of the invoices remains open.

To avoid these potential discrepancies, best practice is to establish business procedures with your customers to ensure that remittance amounts are calculated using the same method as lockbox.