Central bank buying rate

The published table is not one number. It carries a buying and a selling rate for account-based transactions, and a separate pair for banknotes. The account-based line covers transfers, invoices and any transaction that never touches cash, which is what accounting and reconciliation work with; the banknote line applies to physical currency. Rates are announced on business days only, so a transaction dated on a weekend or a public holiday is converted at the last published business day's rate. What the two sides do have to fix in writing is something else: which moment — invoice date, payment date or valuation date — supplies the rate.

In reconciliation the value of an official rate is that both sides can point at the same source. Take one invoice of 25,000 euro. If the seller converts it at the invoice-date rate and the buyer at the payment-date rate, the two ledgers show the same transaction at different lira amounts and the balances will not agree, even though nobody made a mistake. This is why cross-currency matching needs the rate date fixed in writing before the first statement is exchanged. iFinances applies the official central bank rate in cross-currency matching and shows, in the reason recorded next to each match, which rate converted which line.

The most frequent misunderstanding is treating the central bank rate as the rate a commercial bank will give you. Banks apply their own buying and selling prices, and the gap between the amount credited to the account and the amount computed at the official rate is a spread, not an error, though it does need its own line in the reconciliation. The second confusion is between the account-based and banknote columns, which differ on the same day. The third is thinking the rate creates an exchange difference; time creates it, and the published rate only measures it.