The Exposure Created After Every Approval
The approval was given at one moment and the money moves at another. Everything that happens to the price in between belongs to the order that caused it — if anybody wrote it down.
An approval feels like the end of something. A requisition was raised, somebody with authority agreed, the commitment exists, and attention moves on to the next thing. In most markets that instinct is roughly right — the payment follows closely enough that the two moments are effectively one.
Where settlement can be months behind authorisation, the two moments come apart, and the gap between them is where the exposure lives. The amount you agreed and the amount that eventually left are different numbers, and the difference belongs to a specific purchase, made by a specific person, for a specific reason.
Whether anybody can ever say that is decided months earlier, by whether the rate actually applied was kept on the transaction or looked up afterwards from a table that has since moved.
No exchange rate appears in this post, in either direction
Deliberately. No figure, no trend, no expectation. The structural point is identical whichever way a currency moves and by however much, and a post carrying numbers would be out of date within the month while inviting somebody to plan against it. Your bank and your adviser own the numbers; this is about which record they attach to.
Where the difference ends up when nobody is holding it
It does not disappear. It surfaces somewhere, and the somewhere is what decides whether it is useful information or noise.
| Where it lands | What you can do with it |
|---|---|
| On the order it belonged to | Compare what a purchase was expected to cost with what it did. Decide differently next time |
| In a general account, monthly | Know your total exposure. Attribute none of it |
| In one figure at year end | Nothing. By then it spans hundreds of transactions and cannot be decomposed |
| Absorbed into landed cost with no rate kept | Worse than nothing — the unit cost is right and unexplainable, so nobody trusts it |
A number you cannot attribute is not a measurement. It is a fact about the past that arrived too late to be a decision.
The three-way squeeze on a long wait
The currency difference is only one of the things accruing while a payable sits. Three run at once, and they interact:
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The price you agreed becomes an estimate
Not because anybody renegotiated, but because the settlement amount is a function of a moment nobody chose. The commercial decision was taken with one number and executed with another.
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The supplier relationship absorbs the uncertainty
This is the human cost and it is the one finance teams feel most. Where nobody can say which stage a payment has reached, every conversation with the supplier is conducted as an apology instead of from a record — and that is a negotiating position as much as a courtesy problem.
-
The landed cost stays incomplete for months
Transport, clearing and duty settle across a long tail, and the eventual exchange difference is the last of them. If the receipt closed before they arrived, the goods were costed at less than they cost, and every price set from that figure is slightly wrong.
What a system can do, and the thing it cannot
The boundary first, because it is the one that matters and it should not be buried: no software can make a payment leave. Nothing below changes when money moves. What it changes is whether you can say what the wait cost and which purchase it belonged to.
The rate actually applied, held on the transaction
Both amounts retained on the record — the original currency and the settled figure — so a difference is attributable to the order rather than to a month.
A payable with a stage rather than only an age
Queried, approved, funded, waiting. Four situations that an ageing report renders as one word, and they need four different responses.
Landed cost open until the last invoice
The receipt stays open across a long tail, so a cost that settles months later still reaches the unit cost of the goods it belonged to.
One register for money out, with partial settlement
A payable settled in instalments over months is the normal case here rather than the exception, and it should be held as partial rather than approximated.
Approvals that refuse rather than warn
Because where settlement is months away, the approval is the last moment anybody has real control over the commitment. After it, the only variable left is time.
Making the payment happen
Not ours and never will be. We can tell you truthfully which of the four situations a balance is in and what it has cost to wait. The queue is not ours to jump.
How the difference should be presented
Your accountant's judgement with your accountant's liability. We record the rate that was applied and show the working.
One purchase, five minutes
- Take a purchase authorised at least three months ago and settled recently.
- What was the agreed amount, in the currency it was agreed in? Is that figure still on the record?
- What actually left, and at what rate? Is the rate on the transaction or was it derived later?
- Is the difference attributable to that order, or is it in a monthly total with everything else?
- Ask whoever spoke to the supplier during the wait what they were able to tell them. That answer is the one that matters most and it is not a finance question.
What is built here, what is not, and what we would decline is on the Malawi market page. The wait itself — and why an ageing report in this market measures the bank rather than your behaviour — is the payable that cannot be paid.
