Principal's payment order

Principal’s payment order: a document by which the client (the principal) gives the agent a specific task under the agency agreement. The agreement is signed once and sets the general rules. The payment order answers the question of what to do now: which payment, to whom and on what terms.

What it states

• the beneficiary: name, address, country, bank, SWIFT/BIC code, account number or IBAN;
• the payment amount and currency;
• the basis: the contract, invoice or specification with numbers and dates;
• the payment purpose, worded exactly as the beneficiary’s bank will see it;
• the rate used to calculate the rouble amount, and the agent’s fee;
• who pays bank charges.

A payment order is issued for each payment, while the execution period is written once, in the agency agreement. There can be any number of payment orders under one agreement: one for each batch of goods or each invoice. If a contract is paid in installments, a separate payment order with its own rate and fee is drawn up for each installment.

Why it matters in an international payment

The agent pays the foreign beneficiary in its own name, but at the client’s expense and on the client’s instructions. The payment order links these two facts. It shows the bank, currency control and the tax authority that the payment was made on your instructions and under your contract. After execution, the agent reports against this specific payment order: it attaches the payment confirmation, and then the agent’s report and completion certificate.

Principal’s payment order vs. your bank’s payment order

The principal’s payment order is a task for the agent under a civil-law contract. The payment order at your bank is a banking document under which the roubles are debited from your account. Its payment purpose refers to the agency agreement and the number of the principal’s payment order. If the payment goes to a non-resident in roubles, the currency transaction code is placed at the start of the payment purpose. It is better to agree on the wording in advance so that your bank does not ask unnecessary questions.

Common mistakes

• The beneficiary details differ from the invoice by even a single character.
• The payment purpose does not match the contract, and the beneficiary’s bank asks questions or sends the transfer back.
• Instead of a rate and a fee, there is a reference to “the rate on the payment date”, and the total becomes known only after the roubles are debited.
• One payment order is used to pay under several contracts, and the payment is then hard to allocate in the accounts.
• A sub-agent is brought into the payment without your consent.

When VEDmost arranges the payment, we prepare the payment order: the agent, route, rate and fee are written in it before the roubles are debited. The process step by step: How it works.