Chapter 38. Managing Conversion Rates
The world is getting smaller, with businesses and organizations working across national borders more than ever before. With this globalization comes data challenges that can be solved through a number of data preparation strategies. One typical use case for multinational organizations is determining currency conversion rates in order to ensure the financial data being analyzed is consistent and being accurately compared/aggregated.
Challenges of Conversion Rates
Converting rates such as currency seems like such a simple task. Multiply the currency rate by the original value, and you have the currency you require. Easy, right? Not so fast. Depending on the level of accuracy you want, using a single, constant exchange rate might not be sufficient. Currency exchange rates fluctuate throughout the day, every day.
Which rate you use may make a significant difference even in smaller transactions; added up over time, the small differences can accrue, resulting in over- or understated results or profits. The frequency of the conversion rates (hourly, daily, weekly, etc.) is another important decision to make. Greater frequency assists with accuracy but makes the conversion rate tables more difficult to apply, especially to different time periods.
Applying conversion rates consistently is also key, especially when you are working across a number of different business units. Let’s look at how to do this within Prep.