Changing to the Euro |
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Regardless of the arguments for or against a single European currency, it is a reality for most European countries even if it doesn't happen immediately for the UK. You cannot afford to ignore it.
General.
When we think about our own currency - for example sterling - in relation to a foreign currency, we mentally convert between our money and the foreign currency. So when we think of the German mark, think in terms of it being at the rate of about three to the pound, or the French franc at about 10 to the pound. This makes sterling the base currency against which we measure all others.
The same thing applies to other currencies. For example, the American converts all other currencies into US dollars, and the Japanese into yen.
Changing to a different base currency
Many people live and work abroad for a period, or even move permanently to another country. In due course, and without giving the subject too much deep thought, we adapt to our new country's currency as our base, and measure other currencies against it.
This is not too difficult since all our financial dealings in the new country - such as bank accounts and credit cards - are denominated in the new country's base currency. Any bank accounts that we may still keep in the old country continue to operate in the old base currency, and we can continue to make exchanges between accounts in both countries at the prevailing exchange rate.
We may also leave some money in the old country, such as bank accounts to pay outstanding cheques and charges. We cancel all our old standing orders and direct debits and set up new ones in the new country. Ultimately, we probably close the accounts in the old country and move all our personal financial dealings to our new home base. This is all quite straightforward because the two currency systems are quite separate from each other.
Changing to a single European currency
If the change from sterling to euros were to take place overnight, the effect would be much the same as moving to another country.
No such luck. The change will take place over a period of two years. During this time, the different institutions we deal with will take their own decisions as to the date on which they make the change.
For example, your employer may carry on paying you in sterling after your bank has converted your account to euros. Your bank will credit your salary at the official exchange rate.
You may get your electricity bill in euros before while your bank is still operating in sterling. You will write a cheque in euros that your bank will debit to your account in sterling.
From the banks' point of view, all this is quite straightforward. But from your point of view, keeping track of your accounts will be a nightmare.
Another problem will be your tax return. If you are based in the UK, part of your income will be in sterling and part in euros, but you will have to make your tax return in either one currency or the other.
If you are running your own business, this will make your record-keeping just that much more onerous. If you are issuing invoices, some of your customers will want to be billed in sterling, others in euros. You may need to keep price lists in both currencies.
In 10 years all this will be a distant memory. But the period of living with both currencies has to be got to grips with now - before it happens.
We could of course put our faith in the banks and other institutions to keep on top of our transactions for us and get it right on our behalf. Alternatively, we can check all our transactions carefully to make sure we stay in control.
If we are in business for ourselves we have no choice but to stay in control.
How does MoneyBox handle the change to the single currency?
MoneyBox maintains a list of foreign currencies, with each able to specify a different transaction rate for each month. The first currency in the list is considered as the base against which all other rates are calculated.
You can have as many currencies as you need in the foreign currency list.
Any bank, charge, supplier or customer account can be designated in any currency.
Each transaction you enter assumes the currency of the account it is written against. When you change the currency of a Bank account, subsequent transactions against that account assume the new currency. You can override any transaction to use any other currency in the list.
You can look at any account or report at any time in any currency.
To use the Euro as the base currency means that the first currency in the list must be Euros at an exchange rate of 1.0. All other currencies in the list should be expressed at a rate against the Euro.
If you are new to MoneyBox, you will find the foreign currency list set up with the Euro as the base and with all the existing European currencies expressed at their current exchange rate to the euro. All you need to do is to specify your preferred currency in the list - for example, sterling. MoneyBox will initially specify each bank, charge, supplier or customer account as being held in that currency.
During the changeover period, all you need do is change each bank etc account to euros when the bank, card issuer, or whichever, tells you to do so. At any time you can see any or all of your accounts and reports in either euros or sterling, or any other currency.
If you already use MoneyBox, all you have to do at the start of a new accounting year is change the base currency to euros and add a new currency - for example, sterling - and then specify it as the currency in use. You should also check each of your bank etc accounts and make sure they are set to the right currency.
You will also need to change the brought forward asset and liability values to your chosen currency - for example, sterling - because you have changed the base currency to euros. You will be prompted to do this, you only have to do it once, and it is fully explained in the Help facility.
Whether you are a new or existing MoneyBox user, you will need to check standing orders as they are charged against your accounts to make sure that they are in step with what the bank has actually charged. Again, you only have to do this once for each standing order.
That's all there is to it.
If you are using MoneyBox for your business and issuing invoices, MoneyBox lets you maintain your price lists in different currencies. During the conversion to single currency you will be able to quote prices in Euros, not just the conversions to Euros
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