Invoicing, payments and currency treatment. Fredrik Åström

Transcription

1 Invoicing, payments and currency treatment Fredrik Åström

2 Topics 1. Invoicing 2. Payments 3. Currency treatment 2

3 Key aspects of the settlement model - Invoice Weekly invoicing, invoices sent on Monday afternoon Positive amount (BRP pays to esett): Debit notice Negative amount (esett pays to BRP): Credit notice One invoice per country and BRP role One invoice across countries not feasible due to country-specific VAT treatment Invoices distributed as e-invoices XML message for automatic import into finance system PDF image for viewing and verification Sent through network of e-invoice operators Format agreed between BRP and BRP's e-invoice operator 3

4 Key aspects of the settlement model - Payments Direct debiting used for collecting incoming payments to esett Incoming payments from BRP to esett direct debited on Wednesday Outgoing payments from esett to BRP paid on Thursday Settlement takes place over same account where collateral is held Payments executed as same-day-value payments 4

5 Justifications for selected model esett will be a small company with limited financial resources Important to guarantee timely settlement Cannot be accepted that some parties delay their payments at the expense of others Direct debiting best way to guarantee payment discipline and timely settlement Clearest if one invoicing round is closed before the next one is opened Therefore chosen direct debiting and short payment terms This model closely resembles the settlement model of NordPoolSpot 5

6 Information and money flows between parties in the settlement Invoice esett's invoice operator Remarks about invoice BRP's invoice operator Collateral requirement Request to release collateral esett Debit and credit instructions esett's bank esett's account Direct debits Credits BRP's settlement bank BRP's settlement account Collateral increase Collateral release BRP Account balances 6

7 Required setup for invoicing, payments and collateral Invoicing Establish an agreement with an e-invoice operator to receive e- invoices BRPs that don't want to receive einvoices will receive the invoice through from esett's invoice operator Debiting Open a settlement account in a designated settlement bank and grant esett disposal rights to the account balance Inform esett if BRP wants to use a bank that is currently not a designated settlement bank Collateral Post collateral in the form of cash or a bank guarantee Cash collateral should be held on the settlement account Meet weekly recalculated collateral demands 7

8 Main requirements on settlement banks Sufficient credit worthiness Exact requirement under consideration Ability to exchange required messages with esett's main bank Receiving "Request for Transfer" messages in SWIFT MT101 format Reporting of BRP's account balance in SWIFT MT940 format Signing of necessary agreements with esett and esett's main bank 8

9 Weekly tasks for the BRP related to invoicing and payments Every day: Review settlement amounts in Online Service Monday afternoon / Tuesday morning: Review incoming invoice, issue possible remarks by Tuesday noon Review updated collateral requirement Ensure sufficient collateral and balance on settlement account by Tuesday noon When needed: Respond to additional collateral request during the week Issue request to esett to release collateral 9

10 Key aspects of the settlement model Currency treatment All settlement calculations are carried out in EUR BRPs operating in Norway and Sweden can choose invoicing in local currency or EUR Separate choices per role and country if same company operates multiple BRP roles and/or operates in multiple countries Changes can be made once a year Settlement amounts are converted on invoicing day from EUR to local currency for those BRPs that have chosen settlement in local currency esett makes necessary FX forward transactions with its bank Currencies where incoming payments > outgoing payments are sold Currencies where incoming payments < outgoing payments are bought Invoices are converted with the same FX rate as esett obtains for its FX forward transactions No FX gain or loss for esett No need to charge any separate currency fee from BRPs using local currency 10

11 FX forward transactions need to be made to obtain right amounts in each currency for the outgoing payments Illustration: NOK Incoming: EUR Incoming: The amount of incoming payments in one currency will not equal the amount of outgoing payments in the currency In 1 or 2 currencies (SEK, NOK, EUR) esett will have a surplus and in the other currency(ies) esett will have a deficit To cope with these mismatches and to make sure that the right amount will be available in each currency on Thursday when the outgoing payments are to be made, esett makes Foreign Exchange transactions to shift funds from the currency(ies) where there is a surplus to the currency(ies) where there is a deficit. The transactions will be made already on the invoicing date (Monday) as forward transactions that settle on the date of the outgoing payments(thursday) Outgoing: 70 Outgoing: 10 There will always be two transactions made: one between EUR and NOK and one between EUR and SEK To avoid currency gains or losses for esett in the settlement, the invoice amounts will be converted from euro to the local currency with the same FX rate with which the FX forward transaction between these currencies is carried out 11

12 BRPs choosing invoicing in local currency will have a currency risk from delivery hour to invoicing date Imbalance settlement process Delivery hour Preliminary settlement Currency risk for BRPs choosing invoicing in local currency Final settlement Invoicing Due date for incoming payments Due date for outgoing payments D0 D2 D13 Next Monday Wednesday Thursday EUR Local currency All settlement calculations Currency conversion on invoicing date BRPs invoiced in EUR BRPs invoiced in local ccy The BRPs that choose invoicing in local currency (NOK or SEK) will have a currency risk between EUR and the local currency from delivery hour when imbalances are priced to invoicing date when amounts are converted from EUR to local currency This risk would be impossible for esett to hedge since the amounts are not known to esett at the delivery hour when the exposure arises 12

13 Questions?