How to Eliminate Currency Impact from Pricing Analyses

Currencies have been especially volatile over the past two years. While most everyone is aware of the effect currency movement can have on pricing, many organizations struggle to eliminate this effect from their pricing analyses. Many times this is due to commercial teams relying on monthly PivotTable extracts that financial resources pull from ERP systems. Built to satisfy a wide audience, these files generally cater to the masses by providing global data all in USD, in part so global leaders can see roll-ups of regional performance.
Using this data for detailed pricing analytics can lead to problems as evidenced in this example below:


Looking at the year-to-date performance of this customer / product’s price and margin, we see a gradual reduction in price and margin over time. Assuming this customer is priced in euro however; by bringing in the exchange rates finance used to translate data in USD we see a different picture.


In euro we see that pricing and margins have been much more stable, and in fact higher pricing has allowed margin to remain the same. While U.S. based companies or companies with USD-based raw materials might have a problem with USD margins falling regardless of invoice currency, it’s important to remember that for this customer, pricing has increased YTD and further increases may meet a higher level of resistance.

To get around this problem we recommend that organizations produce two waterfalls – one in USD and the other in invoice currency. Having both sets of data available allows users to simply toggle between the two for different analyses, as some analyses like Negative Margin Analysis or Price/Margin Outlier Analysis might be best run globally using a single currency, while others that are more customer-focused are best run in that individual customer’s invoicing currency.