Question

The following table indicates the aggregate quarterly invoices (in US$) between each affiliated company for a recent quarter.

	Payee (thousands)
Payor (thousands)		Australia	Belgium	Germany	Japan	Singapore	UK	US
	Australia		9	217	197	282	211	144
	Belgium	278		59	220	294	160	65
	Germany	93	298		186	6	94	296
	Japan	125	153	220		272	294	216
	Singapore	15	190	240	9		238	95
	UK	139	228	99	272	170		298
	US	70	47	86	247	281	260

If the company uses a re-invoice center, there may be more payments and as a result higher transaction costs than with e.g., multi-lateral netting. Why might the company still elect to use a re-invoice center?

Answer 1

In an company which has international operations the re-invoicing system is used whereby the center receives and pays all invoices in the currency of the originating country and then reinvoices the product to the receiving company in the currency of the receiver's home country.

This method is employed to protect the company from risk exposure caused by currency fluctuations.

This enables the local operations of the company to supply currency to the local units thus improving short term liquidity by providing flexiblity in intra-firm payments.