Part 6 · 2 chapters · ~12 min

Settlement, Float and FX

Settlement cycles between processors, banks and you, float and pre-funding, settlement accounts in the ledger, multi-currency accounts, FX quotes with expiry, booking FX trades as entries across currencies, and revaluation.

Settlement and float

When a card payment succeeds, the merchant is credited immediately in your ledger, but the processor pays you days later in one batch. The gap is float, and the ledger must show it: a settlement receivable asset grows with each payment and shrinks when the settlement arrives (and reconciliation matches it). For payouts, rails often require pre-funding: money moved into an account at the rail operator before payouts can run, tracked as its own asset account with alerts before it runs dry.

code

card payment ₦10,000 for merchant M, processor fee ₦150
  Dr settlement receivable (processor)   9,850
  Dr processor fee expense                 150
  Cr merchant payable M                 10,000
T+1 settlement arrives at bank A ₦9,850 (net, batched)
  Dr cash: bank A                        9,850
  Cr settlement receivable (processor)   9,850

FX: quotes, trades and revaluation

code

customer converts ₦1,500,000 to USD at a quoted 1,500.00 NGN/USD (quote id q_91, expires in 30 s)
  NGN entry:  Dr customer NGN wallet   1,500,000.00 NGN    Cr FX position NGN   1,500,000.00 NGN
  USD entry:  Dr FX position USD           1,000.00 USD    Cr customer USD wallet   1,000.00 USD
each currency's postings balance on their own; the FX position accounts carry the exposure

rule	why
quotes expire and are referenced by id	the customer gets exactly the rate they saw, or a new quote (Trust course: price staleness)
rates stored as decimals with stated precision	never floating point (Computers course part 7)
balance per currency, never across	an entry sums to zero within each currency
revalue FX positions daily at a reference rate	unrealised gains and losses show up in the books, not as surprises