How to Define Both USD and EURO Currency in SAP MM Vendor Master

Introduction

Are you new to SAP MM and facing issues with vendors dealing in multiple currencies like USD and EURO? You're not alone. Many companies, especially in international trade, encounter the challenge of managing vendors who issue invoices in different currencies. Let’s break down how you can effectively handle this situation in SAP MM without constantly switching vendor master data.

Understanding the Currency Problem in SAP MM Vendor Master

In SAP MM (Materials Management), a vendor is usually assigned a default currency in the vendor master record. This currency becomes the default for all transactions with that vendor. But what happens when a vendor invoices in a different currency than what's specified? Frequent changes to the vendor master currency are not recommended and can cause confusion or accounting issues.

Real-World Scenario: A Common Currency Issue

Let’s consider a common case faced by many procurement departments:
  • Default Vendor Currency: USD
  • Vendor Invoice Currency: Sometimes EURO
  • Local Currency: SAR (Saudi Riyal)

Typical Transaction Flow Example:

Step Description
1 Purchase Order (PO) is raised: 2 items @ $10 = $20
2 Goods Receipt Note (GRN) created as per PO
3 Vendor invoice received: 2 items @ €0.80 = €1.60
4 Exchange rate conversion checked
5 Payment processed in default currency (USD), but bank instructed to pay in EURO
6 Exchange difference adjusted at month-end

Best Practices to Define and Handle Multiple Currencies in SAP MM

1. Avoid Constantly Changing the Vendor Master Currency

Changing the currency in the vendor master each time creates audit and reconciliation issues. SAP does not support multi-currency in a single vendor record for transaction purposes.

2. Use Two Vendor Accounts for Different Currencies

The most effective solution is to create two vendor accounts:
  • One for USD
  • One for EURO
Benefits:
  • Accurate tracking of invoices and payments
  • Simplified reconciliation
  • Better reporting and auditing

3. Maintain Currency Flexibility at the Purchase Order Level

SAP allows setting a different PO currency than the vendor master. You can:
  • Keep the vendor master in USD
  • Raise a PO in EURO when needed
  • SAP will handle the foreign currency exchange postings at the time of payment

4. Use Exchange Rate Maintenance in SAP

Ensure that the exchange rate is regularly updated in SAP via Transaction Code OB08. This helps in:
  • Automatic currency conversion during invoice verification
  • Accurate financial reporting

5. Handle Payments Using Bank Instructions

Even if the PO and vendor master are in USD, you can:
  • Process payment through the Payment Run (F110)
  • Modify the bank instruction to transfer the EURO equivalent
  • The system will generate an exchange rate difference entry, which can be reviewed during month-end reconciliation

Alternative Approach: Currency in Text Field

Though not ideal for automation, some companies mention the currency change in:
  • Item Text or Header Text in PO
  • Narration in Invoice Posting
This is more of a workaround and lacks system-level control.

FAQs on Defining Multiple Currencies for Vendors in SAP MM

Q1. Can I define multiple currencies in one vendor master in SAP MM?

No, SAP does not allow multiple currencies in one vendor master record. You must define one currency per vendor master.

Q2. What's the best way to manage a vendor dealing in USD and EURO?

Create two vendor accounts—one for each currency.

Q3. Can I raise a PO in a currency different from the vendor master currency?

Yes, you can manually change the PO currency while creating the PO.

Q4. How does SAP handle exchange rate differences during payment?

SAP posts the exchange rate difference automatically based on the current rate and maintains proper entries in financial records.

Q5. Should I change the vendor master currency for every transaction?

No, this is not recommended. Use PO-level currency control or separate vendor accounts.

Q6. How do I ensure accurate exchange rates in SAP?

Use transaction code OB08 to maintain daily updated exchange rates in SAP.

Conclusion

Managing vendors who operate in multiple currencies like USD and EURO is a common challenge in SAP MM. However, by adopting practical strategies—such as using multiple vendor accounts or leveraging PO-level currency customization—you can streamline your procurement and payment processes efficiently. Avoid the temptation to frequently alter vendor master data and instead implement structured solutions that offer clarity, control, and compliance.

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