How is the promised amount calculated in base currency?

When you create a promise to pay against transactions which are not the in the same currency as your accounting system’s base currency, we need a way to calculate the promised amount back into the base currency.

As we are not allocating parts of the promised amount to transactions individually, we would not know which transaction’s exchange rate to use. Therefore, we calculate the total base promised amount by using an average of the exchange rates, weighted according to the outstanding amount on the promised transactions.

A weighted average of the outstanding amount is a better indicator of how much you would be expected to be paid by your customer in your accounting system’s base currency. For example, if your base currency is GBP and you create a $101.00 promise to pay against 2 USD invoices with the following outstanding amounts:

The weighted average

 (100 * 1.30 + 1 * 1.20) / 101 = 1.299 

would result in a base promised amount of £77.75 ($101.00 / 1.299).

Whereas a regular average

(1.30 + 1.20) / 2 = 1.25

would result in a base promised mount of £80.80. ($101.00 / 1.25).

You can see using the larger outstanding amount for INV0001 better represents what amount promised you would be receiving from your customer. We have weighted the average exchange rate according to the larger outstanding amount.