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Paying a different vendor than invoice

We have a foreign vendor asking to make a payment to a US account under a different name. Are there any legal issues for making such payment.

Answers

Topic Expert
Keith Perry
Title: Consulting CFO and Business Operations A..
Company: Growth Accelerator
(Consulting CFO and Business Operations Advisor, Growth Accelerator) |

Anon,

Can you provide a little more detail there? Is it in the contract? Paper trail? Have goods/services changed hands? If it is all documented, this sounds completely fine and not abnormal at all. But....devil is in the details. You want to make sure that you have title to the goods free and clear, would be my biggest concern.

One theoretical situation is that there is a local (to you) entity that handles (for a fee) invoicing and collections for the foreign company, almost like a consignment operation or a broker. The foreign company doesn't have to deal with banks, etc, and can make their sales and only have one local entity to deal with. This I've run into in Japan, where the buyer will only deal with local companies, so you need to pay a pretty hefty vig (15% or so) to one of a select few companies, chosen by the buyer, in order to get the sale.

Cheers,

KP

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

I'd look into the business AND legal issues behind this request. Why do they want to do it? Are the parties related to each other; does your vendor owe money to the US party; is your vendor in a country where exchange control regulations are burdensome and your vendor is trying to bypass those regulations? Can you talk to the US party to establish this is all above board? Is this a one off request or something likely to be repeated in the future?

Get vendor responses in writing first, before you decide.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

If the invoice from the foreign vendor can be legitimized, and the invoice states that payment is to be made to a 3rd party designated Company located in the US vs the original company, then I don't see an issue.

The issue is when they want a payment made to a 3rd party in a different country than theirs.

Gary Honig
Title: President
Company: Creative Capital Associates Factoring Co..
LinkedIn Profile
(President, Creative Capital Associates Factoring Company) |

There is nothing illegal about getting payment instructions from a supplier that ask to send the proceeds to a third party. The instructions should come to you in a formal Notification Letter, stating that the proceeds of the outstanding invoice have been assigned to ABC Company. With that letter you have been put on notice to pay the third party. The invoice itself should state on it - Please remit to: ABC company.

It sounds like the situation is just a little loosey goosey and if they are foreign they probably just don't know to make it more formal. Ask them to provide a Notification Letter and change the remit to on the invoice and you will be fine.

If they balk at making these changes then..... that's a red flag.

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