International transfers

[LouisaEls]

Hi there,

We have a client in Botswana who pays our SA invoices in pula.

All of our Botswana customers manage to pay the exact amount, but for some reason this client always has a 'short payment'.

Apparently these are bank charges or currency fluctuations. I have never before worked with payments from another country and do not know the basis of such transfers.

Why doesn't the exact amount come into the bank account?

How do I reconcile this on the customer's account?

Thank you

[GillianW]

Hi Louisa

It is probably for bank charges. Depending on how the money is routed bank(s) will charge fees - your customer is (probably) paying the full amount and fees would go the banks. We pay overseas suppliers and they sometimes question the fluctuating deductions. Your bank or your customer should be able to tell you what the charges are to allow you to reconcile. (There is a possibility that your customer is passing all the charges onto you instead of the more usual splitting of fees and you could ask them for proof of payment to check that they are applying for the full amount.)

[Justloadit]

The fluctuations come from the rate at the moment the conversion takes place. The rate does not remain stable all day but fluctuates. So a payment is authorised at 9H00, and is at Rate 1, the money may take overnight to get to your account, your bank then converts it with the rate at that moment, and becomes Rate 2. Rate 1 does not equal Rate 2, and therefor will make a difference up or down on the original Rand amount.

Receiving Banks do not affect the converted amount with bank fees, but create another entry on your bank statement referring to clearing charges and forex charges.
The initiating bank may deduct the cost of the transfer from the amount made by the customer, but I doubt that, as there is usually a form filled in instructing the bank to pay the an amount excluding bank costs.

[Justloadit]

Another issue/problem that may occur, is when the Debtor makes the payment, at a high rate, and the conversion occurs at an low rate.
This makes a the Rand amount less and will show in your books as under paid. A problem to correct now, because the debtor states that he has paid in full.

This is a problem with Forex received payments. You either make the difference as a discount, or generate a credit or debit note for the difference.