TOP TIPS: Switching to local currency invoicing

Thomas Tan, CIMB global sales, FX and transaction head offers advice to companies considering billing in local currencies to obtain better trade terms and improve group-wide hedging strategies.

By I-Ching Ng

Sep 30, 2013

linkedin facebook twitter

Have clear goals before switching to local currency invoicing. Will the company gain any cost benefits from redenominating? A comprehensive cost benefit analysis is critical, as the switch will inevitably involve a trade-off.

Assess your team's capability to manage non-international currency foreign exchange risks; besides having a sound risk management framework and hedging policy, an experienced treasury team to manage currency risk is important.
A company should have the necessary systems and infrastructure to support the switch to local-currency invoicing. It should cover the daily processing of and accounting (financial and tax) for multi-currency transactions.
Assess the tax implications of re-invoicing and redenomination.
Consider potential compliance issues in terms of payment to the recipient of local currency invoicing. For example, what is the permissible credit tenor if the currency is different? Are there implications to import/export licenses with a change in denomination?

Depending on the size and operations of the company, consider setting up an offshore regional treasury centre for local-currency payments.
When making the transition, carefully consider who you work with. Does the partner have any automation for straight-through processing? What are the requirements to ensure efficiency in local currency invoicing and remittance?
A complete suite of hedging, cash management and trade finance products, as well as timely professional advice from the exporter’s bankers could contribute significantly to success.

Sign-in to access CorporateTreasurer content.

Please sign in to your subscription to unlock full access to our premium CT resources.

Free Registration & 7-Day Trial

Note: This free trial is a one-time offer. You are eligible for one free trial per year.

If you are a treasurer, CFO or senior finance professional at a corporate, please register to the website here.

Questions?

If you have any enquiries or would like a quote for a team or company licence, please contact us at [email protected]. Our subscription team will be happy to assist you.

Payments Banks & Service Providers Cash & Liquidity Trade & Supply Chain Finance Treasury