Paying a supplier through a payment agent: step by step

Paying through an agent looks simple: you hand over roubles, and the supplier receives foreign currency. In practice, the payment goes through five steps, and at each one you can lose time or money. Below is the sequence that works for goods and services, for advances and for payment after shipment.

What to prepare before you get in touch

Collect the package before you ask for a quote. That way the terms are calculated for the actual payment, not an approximate one.

• The contract with the supplier, with the specification and annexes. If there is no contract, a signed offer or an invoice with terms will do, but not for every route.
• The invoice. For an advance, usually a proforma; for payment after shipment, a commercial invoice.
• The beneficiary’s details: full company name, address, bank, SWIFT, account number or IBAN.
• Information about the goods or service: what it is, what it is for, the TN VED code if known.
• Your company’s details.

Think through the payment purpose separately. Short and in English: what is being paid for, the contract number and date, the invoice number. Cyrillic is not transmitted in an international payment message, and a vague “payment for goods” raises questions at the banks along the way.

Check that three things match. The supplier’s name is the same in the contract, the invoice and the bank details. The invoice currency matches the contract currency, or the contract allows another one. The invoice amount does not exceed the contract amount. More on invoice fields: filling in an invoice so the payment goes through.

Step 1. Document review and route selection

The agent or broker reads the documents before the agreement. They look at who the beneficiary is, which country its bank is in, what the currency is and what the goods are. The route depends on this: which country the money will go through, in which currency the supplier will receive it, and whether there will be intermediary banks.

The currency affects the price. If a supplier in China has invoiced in yuan and the payment goes out in dollars, there will be a conversion somewhere along the way. Its cost also needs to be visible in advance.

Step 2. Agency agreement and payment order

The agency agreement is signed once. It sets the execution term, the reporting procedure and the rules on sub-agents. A separate payment order is issued for each payment: beneficiary, amount, currency, rate, fee, and who sends the foreign currency.

Read the payment order before paying. You should see the total in roubles. If the rate is “as executed” or the fee is “from”, the cost of the payment will only be known after the debit.

Step 3. Debiting the roubles

There are two models on the market. In the first, the roubles are transferred to the agent under the agency agreement, and the agent pays the supplier from them. In the second, the roubles leave your account and wait for the payment to be executed in an escrow account at a bank. The difference shows when something goes wrong: the route closes, the beneficiary’s bank returns the payment, the agent has problems.

Ask before paying which model the agent works under. And what happens to the roubles if the payment is not executed within the term set in the agreement.

Step 4. Execution and confirmation

The agent sends the foreign currency to the beneficiary. A copy of the payment message serves as confirmation. In SWIFT it is often called by its format: MT103. Other systems have their own document. Ask for it straight away and forward it to the supplier: their bank will find the incoming payment faster.

If the supplier writes that the money has not arrived, do not rush to pay again. Ask the agent for the payment reference: the beneficiary’s bank will use it to find the incoming payment, even if it is held for a check.

The intermediary bank or the beneficiary’s bank may ask a question about the payment. They usually ask for the contract, the invoice and a description of the goods. The faster the answer, the less time the payment spends under review. So keep the document package at hand until the funds are credited.

Step 5. Closing documents and currency control

After the funds are credited, the agent hands over the report and the completion certificate. The report should show the rate, the fee, the amount in foreign currency, the date and a reference to the payment confirmation.

For services and work, a completion certificate signed with the supplier is added to the agent’s report. For goods, the customs declaration: the bank checks its data against the payments.

If the contract is registered with your bank under Bank of Russia Instruction No. 181-I, you need to show the bank that the obligation to the supplier has been fulfilled. The payment did not go from your foreign currency account, so the bank does not see it on its own. The bank will tell you which documents to submit and by when, based on your bank control statement. The same documents will be useful to customs if it checks the customs value.

If there are several payments under the contract

A typical pattern: an advance, then the balance after shipment. There is one agreement with the agent and as many payment orders as there are payments. Each payment order has its own rate and fee, so the cost of each part is visible separately.

Keep a simple register: date, amount, currency, rate, invoice number, what has been shipped. You will need it when reconciling with the supplier and with the bank. The bank sees an advance without a delivery as an open obligation, and the deadline for closing it is set in the contract.

This is a general overview. We will give you an answer on your deal after reviewing the documents and before the roubles are transferred.

VEDmost follows the payment through these steps to execution; the supplier is paid by the agent. We select a company from our own network to match the supplier’s country and currency, and prepare the documents: you sign the agency agreement with it once, and a payment order for each payment. The execution term is set in the agreement, the rate and fee in the payment order, all before the roubles are debited. Under the usual scheme, you transfer the roubles to this company under the agency agreement: this is how clients who work with us regularly pay. If you need a guarantee, on request the roubles wait for execution in a special escrow account at a Russian bank, for an additional fee. More on the Import payments page. If it is a payment against a single invoice, start with Invoice payments.