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Definition

Re-invoicing center

Definition (1):

The re-invoicing center refers to a financial subsidiary used by a multinational firm for reducing transaction exposure by having all home country exports billed in the home currency and then re-invoiced to each functioning affiliate in the local currency of that affiliate.

Definition (2):

The re-invoicing center is a separate division or subsidiary of a multinational corporation that manages the intra-company transaction in various currencies. This division is the invoice processing and billing center for other divisions situated in different parts of the world. It bills and pays all invoices in the originating country’s currency and then re-invoices affiliate divisions in their local currency.

A re-invoicing center’s goal is protecting the larger corporations from foreign currency fluctuation risks. These centers provide a popular way for hedging against foreign exchange risk and managing liquidity within local branches and foreign divisions. The different foreign divisions transact in the local currency and need not navigate the external forex market. Again, these centers can provide liquidity to local branches requiring capital. They provide flexibility in intra-company payments and effectively improves the short-term liquidity management of the company. These centers also play important roles in improving collections and export trade financing by offering flexible payment terms and reducing bank costs. 

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