Workbook
for
Bills & Collections
Version 1.0
© 2001 by i-flex solutions limited
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Document Control
File Name
Creation Date: 10th May 2001
Review Date: March 15th 2002
Last Saved On: 09th Sept.2002
Workbook-Bills and Collections
By : Umesh Aurora/ Rajesh kumar
Rajesh Ganesan / Ravi Handigol
Group: FC-COL Banking Products Group
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Table of Contents
Bills for Collections
Sight or Usance Bills: Import or Export Bills: LC Bill or Non LC Bill:
DA Bills or DP Bills: Usance D/P Bills
Various options in Bills How to handle Bills Collection in FLEXCUBE?
Module Overview: Module Static Maintenance: Product Maintenance
Product Branch and currency restrictions
Product Customer and account class restrictions
Product Tax details
Product Interest and Charges Details
Role to Head Mapping
Event accounting entry definition
Contract Input
Advices, Instructions and FFT’s
Exception Tracers Details for the bill
Discrepancies
SWIFT advices under Bills Module
Others
Flow Chart for BC Product Maintenance & Contract Input
Discount accruals in an LC
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Bills for Collections
Bill of exchange is a financial instrument defined in the Bill of Exchange Act of
UK and Negotiable Instruments Act of India . It is used in business to settle
money transactions. It is defined as “ An instrument in writing containing an
unconditional order signed by the maker directing a certain person to pay a certain
sum of money only to or to the order of a certain person.”
The parties in a bill of exchange are..
Drawer :
Drawee :
the payment
Payee :
One who is the maker of instrument
One on whom the bill is drawn and is expected to make
The beneficiary who is to receive the payment
Typically Exporter / Seller draws the Bill on the Importer / Buyer asking him to
make the payment to the Payee, normally a banker. Seller hands over such a bill
to his banker with a request to receive the money on the bill from the buyer on
his behalf and thereafter credit his account. This process is called collection.
In a trade transaction following documents are generally used.
1. A document for settling money transaction Eg. Bill of Exchange
2. A document signifying transport and possession of goods
Eg. Bill of lading, Airway bill, Motor Transport Receipt etc
3. A document giving description and ownership of goods Eg. Invoice
4. A document covering the risk of tranport of goods from seller to buyer
Eg. Insurance policy
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There are different ways in which bills can be categorized.
 Usance or Sight Bill,
 Import or Export Bill,
 LC Bill or Non LC Bill,
 DA or DP Bill
Sight or Usance Bills: If bills of exchange are drawn at sight by the exporter, they have to be paid by the
importer or by the importer’s bank (drawee) immediately on receipt of
documents. In other words, it is payable upon demand to the payeeexporter/exporter’s bank . On the other hand usance bills have a specific tenor like
30 days, 90 days. If the usance type bill of exchange is drawn by the exporter ,
the bill has to be paid by the importer or by the importer’s bank (drawee) on the
date of maturity.
Acceptance of Usance Bills:
Under usance bills, once the documents have been checked and found to contain
no discrepancies, the drawee/issuing bank gives an undertaking to pay the bill on
the date specified on the bill.. This in banking parlance is called acceptance.
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Import or Export Bills: Import Bills
These are bills handled by the importer’s bank. The importer’s bank would
receive from the exporter’s bank B/E drawn by the exporter. On receipt of these
bills, the importer’s bank could perform one or more of the following operations:
 Collection,
 Payment,
 Acceptance
These bills can be drawn under LC or not drawn under LC
Export Bills
These are bills handled by the exporter’s bank. The exporter draws the bill of
exchange (which could be under LC or not under LC) and submits the necessary
documents of title to goods ( bill of lading, invoice, insurance etc) to his bank.
The exporter’s bank would perform one of the following operations on the bill
 Discount the bill and send it on collection
 Send the bill directly for collection
 Negotiate the bill (if the bill is under LC) and send for collection
 Purchase the bill (if it is a sight bill) and send it for collection.
In all cases the bill has to be sent to the importer’s bank for collecting the money
and cannot be retained by the exporter’s bank.
LC Bill or Non LC Bill:


Bills under Documentary Credits, are known as LC Bills
Collection bills, are also known as Non-LC Bills
Collections bills are cheaper and simpler for the importer than Documentary
Credits: this is because the collecting bank does not have any financial interest or
commitment, so there are fewer formalities and lesser charges/fees.
An importer will need to have import facilities from his bank if he wants to open
Documentary Credits - he does not need any if he imports on a collection basis.
Because of the different requirements of buyers and sellers, there are many
alternative ways of handling trade transactions.
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DA Bills or DP Bills: Documents against Payment (D/P)
This is sometimes referred to as delivery against cash. In effect D/P means
payable at sight (on demand). The collecting bank hands over the shipping
documents only when the importer has paid the bill. The drawee is usually
expected to pay within 3 working days of presentation.
Documents against Acceptance (D/A)
This means that the exporter is allowing credit terms to the importer: the period of
credit is the term of the bill, also known as “usance”. The importer/drawee is
required to ACCEPT the Bill i.e. to make a signed promise to pay the bill on a set
date in the future.
When he signs the bill in acceptance, he can take the documents and clear his
goods. The payment date is calculated from the term of the bill - the term is
usually a multiple of 30 i.e. 30 days, 60 days, 90 days, 120 days etc. and starts
either from sight or from the date of shipment, or from acceptance as stated on
the bill of exchange.
BUT REMEMBER a usance/term bill does not necessarily mean that documents
can be given against acceptance. ie on D/A basis.
Usance D/P Bills
A Usance D/P Bill is an arrangement where the buyer accepts the bill payable at a
specified future date but does not receive the documents until he has actually paid
for them. The reason is that airmailed documents may arrive much earlier than the
goods shipped by sea.
The buyer is not obliged to pay the bill before its due date, but he may want to do
so if the ship arrives before that date. This mode of payment is less in practice but
offers one more settlement possibility.
Remember that these are still D/P terms so there is no extra risk to the exporter or
his bank.
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As an alternative the covering schedule may simply allow acceptance or payment
to be deferred awaiting arrival of the carrying vessel.
If there are problems regarding storage of goods under a Usance D/P bill, the
collecting bank should notify the remitting bank without delay for instructions.
It should be noted however that the collecting bank does not have to do
everything the remitting bank’s schedule says.
Various options in Bills The various operations that are possible in bills are.
Collection
Export Bills for collection: In this case the exporter’s bank sends the bills to the
importers bank for collection of money from the importer. If the bill is a sight bill,
the importer/importer’s bank should pay upon seeing the bill. In case of usance
bill sent for collection, the importer’s bank presents the bill to the importer for
acceptance.
Import Bills for collection: In this case, the importer receives the bills (could be
under LC or not under LC) and makes the payment to the exporter’s bank through
his bank either on sight or an maturity date depending on the payment terms.
Discount
In case of a usance bill, the exporter will get his payment only on the due date of
the bill, which takes 90 or more days depending on the tenor. But if the exporter
wants money immediately, the bank deducts interest upfront and pays the
remaining amount to the exporter. Normally, the term “discount” is associated
with usance bills.
Purchase
Purchasing of a bill is done by the exporter’s bank if the exporter wants payment
of a sight bill immediately. Normally purchase is associated with sight bills that
are not under LC.
Negotiation
The term negotiation refers to any of the following operations on export bills that
are drawn under LC:
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

Purchase of a sight bill under LC
Discount of a usance bill under LC
Acceptance
If the bill drawn by the exporter is a usance bill, the exporter’s bank will first send
the same to the importer’s bank for acceptance by the importer.
Importer’s bank presents the bills to the importer. The importer has to accept the
bill and the importer’s bank will forward the accepted bill to the exporter’s bank.
Thus the operation of acceptance is initiated at the exporter’s bank and completed
at the importer’s bank.
Advance
If the importer does not have sufficient funds to pay the bill, the bank can provide
a loan to the importer. This can be for a sight bill or for a usance bill. Usually, the
usance bill is first accepted and then on due date the bank can provide an advance.
Thus the operation of an advance is applicable only for incoming or import bills
(sight or usance).
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How to handle Bills Collection in FLEXCUBE?
Module Overview: The Bills and Collections (BC) module supports the processing of all types of
bills, both domestic and international and handles the necessary activities during
the entire lifecycle of a bill once it is booked.
The Bills and Collections module supports the processing of all types of
international and domestic bills like:
 Incoming Bills under LCs
 Incoming Bills not under LCs
 Outgoing Bills under LCs
 Outgoing Bills not under LCs
 Incoming Collections
 Outgoing Collections
 Usance or Sight Bills
 Documentary or Clean Bills
In an effort to provide quick turn around time in processing bills, you can create
products, templates or even copy the details of an existing bill on to a new one
and modify it to suit your requirements. This renders the input of the details of a
bill faster and easier. The BC module actively interacts with the LC module of
FLEXCUBE. This enables easy retrieval of information for bills drawn under an
LC that was issued at your bank. Most of the details maintained for the LC will be
defaulted to the bill when you indicate the reference number of the LC involved in
the bill. This eliminates the need to enter the details of the LC all over again.
All types of bills are classified to fall under two categories. They are:
 Import Bills
 Export Bills
All types of incoming bills (international and domestic) handled by your bank are
termed ‘Import’ bills. Similarly, all outgoing bills (international and domestic)
handled by your bank are termed ‘Export’ bills.
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The following operations can be performed on bills (international and domestic):
 Incoming
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Advance
Payment
Acceptance
Collection
Discounting
 Outgoing
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Payment
Acceptance
Collection
Purchase
Negotiation
Discounting
The system allows you to effect a change of operation for the following operation
types:
 Acceptance to Advance (automatic facility provided)
 Acceptance to Discount
 Collection to Purchase
This module also supports automated follow-up and tracer facility for payments
and acceptance. Tracers can be automatically generated at the frequency that you
indicate until a discrepancy/payment/acceptance is resolved.
Depending on the processing requirements of your bank, you can define and store
the standard documents, clauses, and instructions and free format texts. These
details can be incorporated and printed onto the output document of the bill by
just entering the relevant code. This eliminates entering the details of standard
components of a bill each time you need to use them.
Module Static Maintenance: All Modules of FLEXCUBE utilize the Core static maintenance of Customer, GL,
Accounts, and Currency etc. The core maintenance is required to be completed
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before starting the module level maintenance. For starting operations in
FLEXCUBEe there is a list of module specific maintenance, which is required to
be completed prior to starting the Product definition.
The Bills module requires certain basic information to be set up before becoming
fully operational. You can maintain details for the following:
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Clause details
Document details
Goods
Instruction codes
Free Format Texts
Discrepancy Codes and
Parameters for your branch
10.201 Maintaining clauses: A clause is a statement that can accompany a document that is sent under a bill.
Instead of specifying the details of a clause each time you need to use it, you can
maintain a list of the standard clauses, which can accompany (can be part of) the
documents sent under a bill, in the Clause Maintenance screen. The key things to
be maintained here are:
i.
ii.
User defined unique Clause Code
Indicating the clause type – which will determine the type of
document that it accompanies. The nature of the clauses that you define
can fall within the following categories:

Transport

Insurance

Invoice
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Others
iii.
Clause Description contains the Contents of the Clause, which will be
printed on the documents that are required for the bill.
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Maintaining documents: There are certain standard documents that are required under a documentary bill.
This can be maintained in the Bills - Document Master Maintenance screen. The
advantage of maintaining document details is that, at the time of creating a
product or at the time of entering the details of a bill, you need to just specify the
code assigned to the document. The key things to be maintained here are:
 Unique user-defined document code
 Selecting the type of the document – transport, insurance, invoice or others
 Short description of the document
 Specifying the contents of the document with the clause codes
Maintaining goods: There are certain standard goods or commodities that are transacted under bills.
Instead of specifying details of the merchandise each time they are traded, you
can maintain the details of the standard goods in the Goods Maintenance screen.
The things to be maintained here are:
 Unique user-defined commodity code
 Description of the commodity
Maintaining Instruction Codes: You can register the standard set of instructions or statements that are applicable
to the bills that you issue and maintain their details in the Instruction Code
Maintenance screen. These standard instructions can be made to appear in the
correspondence and messages sent to the parties involved in a bill.
 Unique user-defined instruction code
 Description of the instruction
Maintaining Free Format Texts (FFTs): Free Format Texts (FFT’s) may be a set of instructions or statements that are
applicable to the bills that you process. There are certain standard free format
texts that should appear in the correspondence and messages sent to the parties
involved in the bill and these can be maintained in the FFT Maintenance screen.
The fields here are:
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 Unique user-defined instruction code
 Description of the FFT
Maintaining Discrepancy Codes: You can maintain the standard discrepancy codes that are applicable to the bills
you process in the Discrepancy Code Maintenance screen. The key fields are:
 Unique user-defined discrepancy code

Description of the discrepancy
Maintaining Branch Parameters: This is done in BC Branch Parameters available under Bank/Branch Parameters in
the Main Menu. This setup helps in the auto-processing of contracts by the
system. The parameters that are required here are “Accrual Level” whether it need
to be at product level or at the contract level and whether the batch processing
needs to be “Till next working day”
Product Maintenance
A Product in simple terms is a category or type of Bill. The main objective of
creating a product is to construct a broad framework within which you can define
specific Bills. This helps to minimize your inputs at the contract level and ensures
uniformity.
Main Details
 Product Code
 Product Description, Slogan, Start & End Date
 Specifying the Product Group
 Product Type – Import & Export
 Tenor – Sight & Usance
 Under LC
 Document – Clean & Documentary
 Operations
 Indicating whether change of operations is allowed – Acceptance to
Discount, Acceptance to Advance, Collection to Purchase
Product Preferences
 The re-key requirement fields
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 Limits monitoring Details
 Tenor limit specification
 Exchange Rate Variance specification and type of Rate Code to be used
(mid-rate or buy/sell rate)
 Interest and charges components and accrual details
 Pay Due advice details And
 Past Due Reckoning
Product MIS details
The transaction related MIS details could be captured. The multiple MIS codes
can be captured as a MIS group and the group can be defaulted at the product
definition level.
Product Branch and currency restrictions
This will apply restrictions to the contracts done under the product with respect to
the branches in which the products can be used and also the currencies in which
the deals can be entered using this product.
Product Customer and account class restrictions
Deals with Restricted customers cannot be done under this product.
Product Tax details
The taxes applicable are maintained as tax schemes. The relevant tax schemes are
defaulted here for the respective components. This is allowed only if the allow tax
check box in the product preferences is checked.
Product Interest and Charges Details
The interest related details are to be maintained here. The name of the
component, the rule to be applied, the event at which the interest is to be applied,
the type of interest – whether it is fixed, floating or special, the different rates for
specific currencies etc. are defined.
The charges that are to be collected are maintained as charge classes. The relevant
charge classes are defaulted here.
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Role to Head Mapping
The mapping of the ‘accounting roles’ to the desired GLs is defined here.
Alternatively these can be maintained as a class and the class can be defaulted
here.
Event accounting entry definition
The accounting entries and advices as applicable for each event in the life of the
deal are defined here. Alternatively these can be maintained as a class and the
class can be defaulted here.
Documents, Instructions & Free Format Text
Here codes for document and instructions and free formats can be attached to
the product so that they are picked up for all contracts under that product.
These FFTs and Instructions can appear along with the advices that are
generated during the lifecycle of the Bills linked to this product.
Tracers
Tracers are reminders that can be sent to the various parties involved in a bill.
In this screen you can specify your preferences for the tracers that should be
generated for the various exceptions that occur in the life cycle of a bill.
Reserve Exception, Acceptance Exception, Payment Exception, Charges
Exception.
Status Control
A bill that is yet to reach a repayment date or on which repayments are being
made will be considered as having an ‘Active’ status. When a repayment
against the bill is not made on the due date, you may want to do an aging
analysis for the bill. You can do an aging analysis by changing the status of a
bill on which payment is defaulted (such as NAB, PDO)
Contract Input
A Contract is an instruction wherein a customer (drawer) approaches your bank to
purchase, negotiate, discount or send for collection, a financial instrument called a
bill. The contracts are input using the different products that have been created to
incorporate different kinds of bills.
A Bills Contract would therefore require information on:
 Who is the Drawer of the bill?
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 Who is the Drawee of the bill?
 Is the bill drawn under an LC?
 Is it a Sight or Usance bill?
 The operation that is being performed on the bill.
 The amount for which the bill is drawn and the currency in which it is
expressed.
 Details of the parties involved in the bill.
 Details of the collecting bank (for export bill) or the remitting bank (for
import bills).
 Details of the merchandise that was traded.
 The documents that should accompany the bill.
 Specifications for the transportation of the consignment.
By default a bill inherits all attributes of the product to which it is associated. This
means that you will not have to define these general attributes, each time you
input a bill involving a product.
The details captured in the bills contract screen are: -
Contract Main Screen

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Specifying the operation you are performing on the bill. Advance, Payment,
Discounting, Collection, Acceptance for Incoming Bills and Negotiation,
Payment, Collection, Discounting, Acceptance, Purchase in case of Outgoing
Bills.
Specifying References for the Bill. If the bill is under Collection, the
reference number assigned to the collection can be specified. If the bill is
under an LC, then the requirements to be specified are – the customer in
whose name the LC was drawn, the date on which LC was issued and the
reference number of the LC. If the bill is under an LC issued by some other
bank, then the charges of the other bank can also be specified.
Specifying the terms of the Bill. The amount and currency in which the bill is
drawn.
Tenor details for the bill. The value date, tenor of the bill, Base date, Transit
days, maturity date (=Base date + tenor + transit Days), Liquidation Date and
Transaction date.
Specifying Counter party details. The Drawer in case of export Bill, and the
drawee in case of Import bills.
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Specifying Batch Processing preferences. The mode of liquidation whether
auto or manual, whether status change is auto or manual, whether bill will be
made available for rediscounting and whether there will be auto-change from
acceptance to advance.
Specifying the Interest Computation dates – The period of interest
computation, the Grace days to penalty.
The cash collateral details.
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Parties
 The party type of the customer.
 The CIF ID assigned to the party.
 The country to which the party belongs.
 The party’s mail address.
 The language in which tracers and messages should be sent to the party.
 The media through which all tracers and advices should be routed.
 The following table contains a list of party types that can be involved in all
types of bills:
Party Type
Party Description
DRAWER
DRAWEE
ISSUING BANK
NEG BANK 1
NEG BANK 2
BENEFICIARY
ACCOUNTEE
CASE NEED
GURANTOR
ACCEPTING BANK
DISCNTING BANK
REMITTING BANK
COLLECTING
BANK
REIMBURSING
BANK
CONFIRMING
BANK
Drawer
Drawee
Issuing Bank
Negotiating Bank 1
Negotiating Bank 2
Beneficiary
Accountee
Case Need
Guarantor
Accepting Bank
Discounting Bank
Remitting Bank
Collecting Bank
Reimbursing Bank
Confirming Bank
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Goods, Shipment and Document Details
 Specifying details of the document applicable to a bill.
 Specifying the clauses for the documents
 Specifying shipping details – transshipment details, latest date of shipment,
the carrier of goods, location and destination of goods shipped.
 Indicating the goods details
Advices, Instructions and FFT’s
 Priority, Medium of advice and whether messages should be suppressed.
 Specifying instructions and Free format texts for a bill
Exception Tracers Details for the bill
 Payment exception or Acceptance Exception are the two types generated in
FLEXCUBE.
 Specifying whether tracer is required for the bill
 Specifying the number of tracers to be generated, the frequency, and the
receiver of the tracers
Discrepancies
 Specifying the discrepancies that occurred in the bill
 Specifying if a reserve tracer should be generated
 Specifying the number of tracers that should be generated, the frequency and
the receiver of the tracers.
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SWIFT advices under Bills Module
Note: There is no SWIFT equivalent to Remittance letter, which is the covering letter
for the documents being sent by Remitting Bank to Collecting Bank (by mail)
i.
MT410 Acknowledgement
This is the SWIFT message in acknowledgement for receipt of remittance
letter and documents. It is sent by Collecting bank (the receiver of the
remittance letter) to Remitting Bank (the sender).
In FC this gets generated when an Incoming contract(collection, discount
etc.) is created.
ii.
MT400 Advice of payment.
This is the payment (transfer) message sent by the Collecting bank to the
remitting bank towards settlement of the Dues under the Bill (partial of final).
The collecting bank sends this message after it has collected the dues from
the Drawee (or Drawee bank) or made other arrangements (such as discount,
advance etc.). The message is usually a substitute to MT100, Mt200. Thus if
MT400 is sent then MT200 should not be sent (this will then become a
double payment)
In FC this gets generated when ever an incoming Collection or acceptance is
liquidated (through liquidation option icon). The payment date in the
exceptions tab is automatically populated. A separate version and event is
created for history.
iii.
MT 430 Amendment of Instruction
This is sent by remitting bank to collecting bank intimating the amendments to
the remittance instruction sent earlier (through remittance letter). Thus though,
the remittance letter is sent by mail (as it accompanies documents), amendment to
it is done through this message. The Collecting bank may send MT410 towards
acknowledgement.
In FC this gets generated when ever an outgoing Collection or discount is
amended
iv.
MT420 Tracers
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These are periodic ‘reminder’ or ‘queries’ sent by remitting bank to the
collecting bank seeking information on the status of acceptance or payment of the
bill as the case may be.
In FC this gets generated through an EOD batch function at predefined
frequency. It is generated for “outgoing/ export” bills (collection / discount /
negotiation) when set-up as required in the tracer maintenance tab.. It gets
stopped when the tracer generation is flagged as “not required” in the respective
Bill contract.
Tracers can be generated under the following cases (for outgoing/export) bills
1. Payment Exception – to enquire the payment status for a sight bill
2. Acceptance exception - to enquire the acceptance status for a usance bill
3. Reserve Exception – sent by negotiating bank (for bills under LC), if
discrepancies are noted and negotiation is done under reserve (right of
recourse). The tracers are for reminding resolution of the discrepancies and
get stopped when the respective discrepancy is marked as resolved.
v.
MT422 Advice of Fate
This is sent by the Collecting bank to the remitting bank as a reply to the tracers
(MT420).
In FC this is generated as a (one time advice- when ever required) when Advice
of Fate (in the exception tab) is chosen for an Incoming/Import bill
(Collection/discount). The advice of fate can be for payment (DP) or Acceptance
(DA). It is possible to attach “reasons” as clauses to the advice using the Free
format clause code feature of FC.
vi.
MT416 Advice of non-payment or Acceptance
This an advice sent by the collecting bank to the remitting bank, stating that the
Drawee has refused payment (of sight bill or matured usance bill) or acceptance
(of a usance Bill). The bills and documents are usually returned back to the
remitting bank separately.
In FC this is generated as a (one time advice) when (the respective import bill
contract is unlocked and ) non-payment Msg date or Non- Acceptance Message
date is input (in the exception screen tab) . A separate event and version is
triggered which keeps history of this event
vii.
MT412 Advice of acceptance
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This is sent by the collecting bank to the remitting bank advising the fact that the
usance bill is accepted by the Drawee. Payment (on the maturity date) follows
this activity.
In FC this is generated as a (one time advice) when (the respective import bill
contract is unlocked and ) Acceptance Msg date is input (in the exception screen
tab) for a collection Bill. A separate version and event is created for history. For
“acceptance” operation where the bank also accepts the bill this is directly
triggered.
Others
Apart from these details there is a set of other details, which can be entered, in the
different buttons available in the contract main screen. These include the
Settlement details, Interest and charge details, MIS details, TAX details, Contract
Linkages; User defined fields, FX linkages, Invoice Details.
 Forfeiting of Bills

By specifying the invoice details. The identification number of invoice,
the date on which it was raised and the amount that was raised.

Specifying the margin details – margin can be percentage of bill amount
or flat amount.

Liquidating the margin
 Linking contracts to Accounts and deposits


Specifying the type of linkage – account or deposit
Specifying the details of linkage, the currency, exchange rate, linked
amount
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Workbook – Bills and Collection
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Flow Chart for BC Product Maintenance &
Contract Input
WORKFLOW FOR BILLS AND COLLECTIONS MODULE
PRE REQUISITES
CORE MAINTENANCE
DOCUMENT
MAINTENANCE
GOODS/COMMODITIES
CODES
STATIC MAINTENANCE
INSTRUCTION CODES
CLAUSES
MAINTENA
NCE
FREE FORMAT
MAINTENANCE
BC BRANCH PARAMETERS
PRODUCT MAINTENANCE
BC PRODUCT MASTER MAINTENANCE
CHARGES DEFINITION
TYPE - Import or export
TAX DEFINITION
UNDER LC?
TENOR - Sight or Usance
INTEREST DEFINITION
ACCOUNTING ROLES
MIS DEFINITION
Clean or Documentary
PREFERENCES
OPERATIONS
BRANCH/CURRENCY RESTRICTIONS
CUSTOMER RESTRICTIONS
TRACERS
DOCUMENTS, INSTRUCTIONS & FFT
STATUS CONTROL
USER DEFINED FIELDS
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Workbook – Bills and Collection
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WORKFLOW FOR CONTRACT
INPUT
PRE REQUISITES
BC PRODUCT MAINTENANCE
BILLS CONTRACT SCREEN
CONTRACT INPUT
STAGE
OPERATION
MAIN
SCREEN
PARTIES &
LIMITS
DOCUMENTS
/SHIPPING
DETAILS
CONTRAC
T OR FX
LINKAGES
BILL ATTACHED TO LC. AND THE CHANGES
IT UNDERGOES AS LC AVAILMENT, ETC.
EXCEPTIONS
DISCREPANCIES
ADVICES/
FFTs
CHANGES IN CHARGES/TAX/ MIS/SETTLEMENT
DEFAULTS PICKED UP FROM PRODUCT
SAVE THE CONTRACT OR
PUT ON HOLD
DELETE THE
CONTRACT
AUTHORIZE
Life Cycle Events
AMEND
CONTRACT
LIQUIDATE
GENERATE
MESSAGES
REVERSAL
COLLECTION
TO PURCHASE
OPERATION CHANGES
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ACCEPTANCE
TO DISCOUNT
ACCEPTANCE
TO ADVANCE
Workbook – Bills and Collection
Banks can finance EXPORTERS by:



PRE-SHIPMENT FINANCE for specific requirements e.g. Packing
Credits, Manufacturing Loans, usually relating to a single order or
shipment. These are loans granted to the exporter to enable him to
purchase raw materials to manufacture the goods.
POST SHIPMENT FINANCE - The Bank may be prepared to
PURCHASE or DISCOUNT bills of exchange after shipment but before
payment by the importer. This means making an advance to the exporter
against the security of the bills representing the goods shipped, pending
payment by the importer.
Running an OVERDRAFT to cover expenses of any kind.
Banks can finance IMPORTERS by:
 IMPORT LOANS for specific shipments known as either LOANS
AGAINST IMPORTS (LAI) or CLEAN IMPORT LOANS (CIL).
Running an OVERDRAFT
In case of import bills, liquidation would mean payment of money to the
exporter’s bank on the due date of payment.
Discount accruals in an LC
When an export bill is discounted or negotiated, the discount income is taken
upfront. Discount accruals is a process by which the discount earned is
progressively amortized till the maturity date so that a true picture of income for
the period can be obtained. Accruals can be daily, monthly, quarterly, half-yearly
or annual.
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