A business that buys or sells across borders deals in more than one currency, and its accounting has to handle that. This piece is about multi-currency accounting in Odoo.
When multi-currency matters
A business operating in a single currency has straightforward accounting in that respect: every transaction is in the one currency. A business that deals across borders, that sells to customers or buys from vendors in other currencies, has transactions in more than one currency, and its accounting has to handle them. Multi-currency accounting is the handling of transactions in currencies other than the business's own, so the accounting reflects multi-currency dealing correctly.
What multi-currency accounting handles
Multi-currency accounting handles a few things. It handles transactions in foreign currencies: an invoice to a customer in their currency, a bill from a vendor in theirs, recorded correctly. It handles exchange rates: the rates at which currencies convert, since a foreign-currency transaction has to be related to the business's own currency for the accounts. And it handles the differences that exchange rates cause: because exchange rates move, a foreign-currency amount can be worth different amounts in the business's currency at different times, and that difference, the exchange difference, has to be accounted for. Odoo supports multi-currency accounting, handling these.
Exchange rates
Exchange rates are central to multi-currency accounting, because they are how foreign-currency amounts relate to the business's own currency. Odoo handles exchange rates, including being able to keep rates updated, so the conversion between currencies is based on current rates. The exchange rate is what lets a foreign-currency transaction be expressed, for the accounting, in the business's own currency.
Exchange differences
A particular thing multi-currency accounting must handle is exchange differences. Because exchange rates move over time, the value of a foreign-currency amount in the business's own currency changes. For example, a foreign-currency invoice may be worth one amount in the business's currency when it is issued and a slightly different amount when it is paid, because the rate moved. That difference is an exchange difference, and it is a genuine financial effect that the accounting has to recognise. Odoo's multi-currency accounting handles these exchange differences, so the accounting correctly reflects the effect of rate movements.
Handle multi-currency with accounting knowledge
An honest note. Multi-currency accounting, with exchange rates and exchange differences, is more involved than single-currency accounting, and it is genuinely an accounting matter. The correct handling of foreign-currency transactions and the differences rate movements cause is a matter of accounting rules. A business that deals in multiple currencies should set up and handle its multi-currency accounting with proper accounting knowledge, so the multi-currency dealing is reflected correctly. Odoo provides the multi-currency capability; using it correctly is an accounting matter to be done properly.
The takeaway
Multi-currency accounting in Odoo handles a business's transactions in currencies other than its own: foreign-currency invoices and bills, exchange rates that relate foreign currencies to the business's currency, and the exchange differences that arise because rates move over time. It matters for any business dealing across borders. Multi-currency accounting is more involved than single-currency and is genuinely an accounting matter, so a business dealing in multiple currencies should handle it with proper accounting knowledge. For how we approach Odoo, see our ERP practice.