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# Foreign exchange (FX) impact

# Foreign exchange (FX) impact – Principles, calculations, and reading in Fincome

**Conversion at the issue date:** each line (invoice or credit note) is converted into your reporting currency at the ECB rate of the issue day.

**Monthly vs annual:**
* Monthly subscription → a new rate applies at each cycle → *the MRR varies with the foreign exchange market.*
* Annual subscription → a single rate over the whole period → *the MRR remains stable from one month to the next*.

**Operational reading**: in the MRR/ARR Movements view, an FX effect isolates the purely currency-related impact of the monthly variation (separate from organic business variations).

**Exports**: the fx_rate_applied column documents the rate used line by line.

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# Scope: where FX comes into play in Fincome

**Covered by the FX conversion:**
* **MRR / ARR**: Fincome recognizes MRR/ARR from the amounts already converted at the issue date (invoices and credit notes).
* **MRR/ARR movements**: the monthly variation is broken down into *Business impact* (New / Expansion / Contraction / Churn) and *FX effect* (pure currency effect).
* **Exports**: the line-level detail including the `fx_rate_applied` for internal audit and reconciliation can be provided on request.
* The original amounts (in the billing currency) are not modified: the conversion is calculated and stored separately for reporting.

**Customer context:** multi-currency management and FX effect isolation are part of the functional scope deployed with our mid-market/enterprise customers (e.g. multi-entity and multi-currency environments, cases covered in our business cases).

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# Rate source and application rule

→ **Source**: Fincome retrieves the European Central Bank's EUR/XXX fixing daily (published ~4 p.m. CET).

→ **Moment of application**: when an invoice or credit note is synced, the original amount is converted at the issue-day rate and stored.

→ **Immediate consequence:**
* Monthly: at each cycle, the subscription "takes" the current month's rate.
* Annual: the subscription "stays" at the rate of the annual invoice's issue date.

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# Numerical example

**Assumption:**
* 2 subscriptions denominated in USD: $100 monthly + $100 annual
* Reporting currency: EUR
* EUR/USD end of Jan 24: 1.07
* EUR/USD end of March 24: 1.15

**Impact in Fincome:**

| Month | Total MRR (USD) | Monthly MRR (EUR) | Annual MRR (EUR) | Total MRR (EUR) |
| ---- |
| Jan 24 | $200 | €93.46 | €93.46 | €186.92 |
| March 24 | $200 | €86.96 | €93.46 | €180.41 |
| Difference (FX) | — | – €6.50 | €0.00 | – €6.50 |

→ In euros, the MRR curve drops by €6.50, even though nothing changed on the customer side: it is 100% FX.

**Simplified formula of the FX effect (EUR/USD)** Let *rₘ* = EUR/USD rate of month *m*, then for a constant MRR of $100: `FXₘ (€) = 100 × (1/rₘ - 1/r₍ₘ₋₁₎)`

**Example:** Jan → Feb 2024 if r_jan = 1.07 and r_feb = 1.12  100 × (1/1.12 – 1/1.07) ≈ 100 × (0.8929 – 0.9346) = – €4.17

**Reading:** when the EUR appreciates (EUR/USD ↑), $1 is worth fewer €, so the MRR in € decreases (negative effect).

**Good board habit:** to present organic performance, present the ARR bridge cleaned of FX impacts.

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# Reading the MRR/ARR Movements view

→ **For each frequency (monthly, quarterly, annual), Fincome calculates:**

* *Business impact* (New / Expansion / Contraction / Churn): the business-related variation (price, quantities, upgrades/downgrades), already converted at the issue-day rate of the invoices concerned.
* *FX effect*: the purely currency-related variation between the start and the end of the period, at constant MRR in the original currency.

→ **Quick diagnosis:** if *Business impact* = 0 and ΔMRR_total ≠ 0, the variation comes exclusively from FX.

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# Points of attention

* The oscillation is not "an error": a monthly MRR in a foreign currency mechanically moves in the reporting currency, even without any commercial action.
* Annual ≠ Monthly: if you pre-bill annually, the MRR recognized in the reporting currency remains stable (a single conversion rate).
* Credit notes: a credit note issued later is converted at the credit note's issue-day rate — its effect can be seen both in *Business impact* (credited amount) and in *FX effect* (if the rate has changed).
* Traceability: check the applied rate in your exports via `fx_rate_applied`; keep this file as an audit document.
* Security and compliance: data and exports are encrypted in transit and at rest in accordance with our internal security policy.

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# FAQ

→ **Where do the exchange rates used come from?**
Fincome retrieves daily the EUR/XXX fixing published by the European Central Bank (~4 p.m. CET). Each invoice/credit note line is converted at the issue-day rate, and this converted amount is stored then used for MRR/ARR recognition.

→ **My subscription is in USD, my reporting currency in EUR: what varies?**
• Monthly: at each cycle, the new invoice "takes" the current month's rate → the MRR in EUR can vary solely due to FX.
• Annual: the annual invoice "freezes" the rate of its day → the MRR remains stable in EUR over the period (excluding business movements).

→ **Why is my MRR curve in EUR going down even though no customer churned?**
This may be an effect related to FX variations.
***Example (reporting in EUR)****: $100 monthly, EUR/USD goes from 1.07 (Jan.) to 1.12 (Feb.)  Jan.: 100/1.07 = €93.46  Feb.: 100/1.12 = €89.29  *
*Δ FX = – €4.17 without any change on the customer side.*

→ **Where is the FX effect visible in Fincome?**
In *MRR/ARR Movements*, Fincome systematically separates:
• *Business impact* (New / Expansion / Contraction / Churn) – converted at the invoice-day rate.
• *FX effect* – purely currency-related variation between the start and the end of the period.

→ **How to reproduce the "FX effect" in Excel for a stable monthly subscription?**
If the price in the original currency is constant (e.g. $100), the monthly contribution of the FX effect between m₁ and m₂ is: `FX (€) = Amount in currency × (1/tₘ - 1/t₍ₘ₋₁₎)` *E.g. Jan. → Feb. 2024: 100 × (1/1.12 - 1/1.07) ≈ – €4.17.*

→ **Do credit notes follow the same logic?**
Yes. A credit note is converted at the issue-day rate (like an invoice) and impacts the _Business_ movements of the month concerned; any variation due to the foreign exchange market remains isolated in the _FX effect_.

→ **Can I change the reporting currency?**
Yes, by contacting support. An option will soon be available in *Settings › Reporting currency*. Dashboards and exports will align with the chosen reference currency.

→ **How to "neutralize" the FX effect for a board or an executive committee?**
Two operational options:
• **Business reading**: use the *New/Expansion/Contraction/Churn* drawers and ignore the *FX effect* in the narrative.
• **Numerical series**: export and subtract the `fx_effect` column to present an "FX-neutralized" MRR/ARR.

→ **Where to check the rate actually applied per line?**
In all detailed exports: check the `fx_rate_applied` column (ECB rate of the issue day stored by Fincome). Contact Fincome support if needed.

→ **Does the FX effect impact my efficiency KPIs (NRR, expansion, contraction)?**
Yes, the FX effect impacts all your activity KPIs. An option will soon be available in Fincome to analyze your KPIs cleaned of exchange rate variations.

→ **Why does the FX effect seem to affect only part of my base?**
• Monthly subscriptions "take" a new rate at each cycle → sensitive to FX month by month.
• Annual subscriptions are insensitive to intra-year FX (rate frozen at the invoice), hence a different mix of effects depending on your subscription structure.

→ **I backdated / reissued an invoice: what happens on the conversion side?**
The line is (re)processed at the ECB rate of the issue day of the invoice or credit note concerned. Storing the converted amount guarantees the reproducibility of your MRR/ARR figures.

→ **What audit granularity is available if the auditor challenges me?**
• Rate applied per line: `fx_rate_applied`.
• Monthly bridge: *Business / FX effect* separation.
• Traceability: conversion performed at ingestion then stored (identically reproducible on export).

→ **Security and compliance: are the conversion data and exports protected?**
Yes. Data is encrypted in transit and at rest, managed within a structured security framework (access policies, vulnerabilities, continuity) and steered via formalized risk governance. Your team can request access to our security policies.