Forward contracting is a financial tool used to hedge foreign exchange risk by locking in a fixed exchange rate for a future transaction. It involves an agreement between two parties to buy or sell an asset at a predetermined price and date. Forward contracts are commonly used by importers and exporters to manage their exposure to currency fluctuations.
Forward contract is used for hedging the foreign exchange risk for future settlement. For example, An importer or exporter having FX contract limit may lock in current exchange rate by entering into forward contract with the bank to avoid adverse rate movement.
The essential idea of entering into a forward contract is to fix the exchange rate in advance and thereby avoid the exchange rate risk. Forward Rates = spot rate +/- premium/discount
This custom application works seamlessly with ERPNext to allow you manage your forward contracts.
Forward Contract can utilized at the time of the payment received or made. In this case multi currency transaction will be processed at the forward contract rate.
The outstanding forward contract amount will be reduced by the utilized amount. To do utilization of forward contract:
If for any reason the forward contracts couldn’t be utilized till maturity, or for any other reason you decided to close the forward contract with bank. You need perform forward contract cancellation. This will reduce the outstanding amount of forward contract by cancelled amount, and park the gain or loss in cancellation of contract in respective profit and loss account. To do this:
Go to Forward Contract List, Open the forward contract you wish to cancel.
Complete documentation for Forward Contract here
GNU GPL V3. (See license.txt for more information).
The Forward Contract code is licensed as GNU General Public License (v3) and the copyright is owned by FinByz Tech Pvt Ltd.
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