European Economic & Monetary Union: Firms Need to Prepare for Multi-Currency Accounting; Ben Adams, Managing Director of ReQuest Systems, Outlines the Implications of the Euro for UK Businesses and Their Financial Software
Adams, Ben, The Birmingham Post (England)
For many UK companies, the headache this New Year's Day will not come courtesy of alcohol.
As many are aware, January 1, 1999 is the day on which European Monetary Union is to be introduced.
It is also the deadline for installation of multi-currency accounting systems.
Keen to take advantage of the imminent transparency of prices between suppliers, the majority of blue-chip companies already have the requisite computer accounting upgrades well in hand.
However, at risk of generalisation, there is one sector of British business which still appears fairly complacent to the economic upheaval ahead - small and medium-sized enterprises .
What many of them seem to be overlooking is the fact that the decisions of their multi-national customers and suppliers will force them to deal with foreign currency transactions, even though they may only trade domestically.
Partners of Rover, Philips and Siemens, among others, may find that they are dealing with purchase invoices in euros.
Even price lists and sales invoices may need to be generated in euros.
To be fair, the large majority of SMEs already trading overseas do understand the impact that EMU will have on them.
However, there may well be some unexpected hiccups as accountancy systems fail to pick up on issues such as "triangulation".
To ensure consistent calculation of currency values, the European Commission has insisted that conversions are made first to the euro and then to the participating currency.
This is the two-step procedure called "triangulation" and very few multi-currency accounting systems have been upgraded to handle it.
Accountancy software, however, should not be the only EMU concern under the umbrella of financial administration.
Companies should also be considering the link between the way they arrange their banking and their nominal ledger systems. …