Reinvoicing Center

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DEFINITION of 'Reinvoicing Center'

A subsidiary or department of a multinational corporation where all intrafirm transactions are centralized and foreign currency related receivables and liabilities are netted. The means of hedging the entire multinational firm's foreign currency exposures are also determined by the reinvoicing center.

INVESTOPEDIA EXPLAINS 'Reinvoicing Center'

Employing a reinvoicing center will likely limit the firm's risk to transaction exposure. For example, suppose that U.S.-based XYZ Corp. has subsidiaries in France and Canada. The French subsidiary owes the Canadian subsidiary debt in Canadian dollars for an intrafirm purchase of processed goods.

The U.S. arm of XYZ recently received a payment in Canadian dollars and owes a debt in euros. Instead of having each portion of the company engage in its own foreign exchange transaction, a reinvoicing center allows the different inflows and outflows of money, and make the process more efficient and stable. The invoice center can also determine a preset foreign exchange rate for hedging purposes.

In this case, the most optimal solution would be to have the French subsidiary exchange its euros to the U.S. office for its Canadian dollars.

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