Factoring Companies Guidebook
Export Payment & Collections
Definition
Any debtor receipts, which originate in a country other than the United Kingdom.
See also : - "Currency Invoices"
Concerns
Debtor payments may be difficult to identify if received in currency and converted to pound sterling by the Client's bank for credit to a sterling account.
We must be aware of all existing bank account transactions, including overseas banks as the latter may be used for receipt of debtor payments without our knowledge.
Overseas debts may be difficult to collect due to local customs and procedures and these may become particularly pertinent if the we or the Client have to resort to legal action for recovery of overseas debts.
Exchange control restrictions, which may be in force in the debtor country may prevent or limit the debtor's ability to remit funds overseas to the Client. The debtor may pay in local currency owing to difficulties in obtaining the invoice currency.
If invoices are raised in a currency other than sterling, they may result in exchange rate losses for the Client that also erodes the amount collectible against the invoices by us.
Overseas agents, if employed by the Client may also become involved in the collection (either by cash receipt or banking into its own accounts) of debts from customers.
Identification
Seek to determine whether the Client maintains separate currency accounts and also whether they maintain overseas bank accounts for the collection of export debts/payments to overseas suppliers.
Ensure that all funds received by us are direct from the customers, not from overseas agents.
We should ensure that it is aware of all bank accounts held by the Client, whether in the UK or overseas and these should be checked at audit, along with the review of all bank statements to ensure that receipts due are not being miss-directed to the Client. If the latter is defined, audit should also confirm the transfer of those receipts to us on a timely basis and encourage the Client to have the funds paid into our trust account.