Expanding your business globally and catering to international customers is a significant growth opportunity. According to the Ministry of Commerce and Industry, <a href="https://www.google.com/amp/s/www.business-standard.com/amp/economy/news/services-exports-may-reach-usd-400-bn-during-2023-24-sepc-123041900386_1.html">Indian export services</a> grew by 42% in 2022-23 from 2021-22.&nbsp;

Export helps diversify your business into various markets, gives you access to a wider audience, generates greater revenue, and helps you gain foreign investment opportunities. However, it has its set of challenges.&nbsp;

One of these challenges is receiving payments from international clients. The common issues with <a href="https://www.skydo.com/blog/cross-border-payments">cross-border payments</a> include exchange rates, <a href="https://www.skydo.com/blog/hidden-fees-in-bank-rates">hidden fees</a>, tracking, processing fees and defaults. They affect cash flow and, by extension, business success.&nbsp;

An accountant plays a pivotal role in managing the financial aspects of cross-border transactions and ensuring smooth payments from US clients. Their attention to detail, financial expertise, and ability to track and manage cash flow effectively contribute significantly to avoiding financial losses and supporting business growth in international markets.

However, billing US clients and successfully receiving the payments in your company's bank account can be a long battle. You have to be careful of every step and be prepared for the next action to avoid non-payment or delays in payment. Therefore, if you’re looking to expand your service offerings to the US, it is essential to create and follow a checklist for receiving payments from them.&nbsp;

The purpose is to avoid financial losses and ensure business growth. Here is a step-by-step concrete checklist for your accountant on how to bill and receive payments from your US clients.

Your Accountant’s Checklist for Global Payments

As tech exporters, you might have to purchase hardware or software to provide services to your client. You may also have to pay suppliers and consultants working on the project and keep advance stock. It helps you prepare a defined process on how and when you want to receive money from US clients.&nbsp;

You can keep the following points in mind while discussing payment terms with your client.

Once you have defined the payment terms, you must check legal and regulatory compliances. Under the <a href="https://www.skydo.com/blog/gst-bill-format-what-it-includes">GST regime</a>, the export of services is covered under 'zero-rated supply', which means that zero GST is charged on export.&nbsp;

If you receive payments in US dollars, zero GST will be applicable. However, if you receive the payment in Indian currency, 18% GST will be applicable on foreign exchange transactions.&nbsp;Before accepting money from the US, your accountant needs to ensure that you have met the following legal requirements:

Also read: <a href="https://www.skydo.com/blog/gst-requirements-international-service-sales">Understanding GSTIN Requirements for Export Businesses in India</a>

The next step is choosing the appropriate payment method to receive money from the US. These can include:

You can finalise the appropriate mode for receiving payment by considering the following factors:

You can also read: <a href="https://www.skydo.com/blog/global-payment-trends-2024">Payment Trends to Watch Out for in the Global Business Landscape</a>

Another crucial step in getting money from the US or any domestic or international client is to keep proper records and documentation of all transactions, taxes withheld, bank transaction charges, and other relevant documents. This helps tally the balance sheet and perform financial audits at the end of the financial year.

A crucial accounting process, it involves organising financial data in a structured manner and preparing informative reports on such data. It can include both financial and performance reporting.&nbsp;

While financial reporting includes identifying and recording various international transactions and preparing financial statements, performance reporting refers to analysing the financial performance of the company basis predefined objectives.

Once you have received payment confirmation from your client, your accountant must do proper bank reconciliation to verify the payments and ensure that all payments are correctly recorded in the company's books. Bank reconciliation helps avoid any discrepancies in financial records, such as currency conversion charges.

Stuck international payments block cash flow and might hinder your regular business operations. Skydo streamlines the process of receiving money from US clients. Let's understand how.

There are two scenarios while receiving money from the US:

Scenario 1: The client pays in the US currency.&nbsp;

In such a case, the amount is immediately deducted from the client's bank account and transferred to your account, then converted into rupees from US dollars.&nbsp;

Currency conversion often occurs over several days, and banks charge hefty fees per transaction. Another challenge is bank reconciliation because the amount after currency conversion does not match the invoice amount. Fluctuations in exchange rates may further create a mismatch.

Scenario 2: The client remits money in INR.&nbsp;

In this case, the money is not immediately wired from the client's bank account. It is first converted from US dollars to Indian currency. This is a tedious process which can take up to a week before the funds are withdrawn from the client's account.

Also read: <a href="https://www.skydo.com/blog/should-i-invoice-in-inr-or-foreign-currency">Should I Invoice in INR or Foreign Currency?</a>

In both scenarios, the payment can take up to one week or even more to finally reach your business' bank account. Skydo aims to simplify this process, making it easier and faster to receive money from US clients by helping businesses open a local receiving bank account in the US.&nbsp;

The client easily transfers the payment to the local bank amount, which can be claimed as <a href="https://www.skydo.com/blog/inward-remittance-in-india">foreign inward remittances</a>. Hence, Skydo reduces the time processing time and various charges and helps you get your money from the US without any hassle.

In addition to opening a <a href="https://www.skydo.com/blog/seamless-payment-experience-with-international-bank-accounts">local receiving bank account</a> in the US, the following are some additional features of Skydo that help make the payment receiving and managing process more robust.&nbsp;

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Importance of Regular Communication with Your Accountant

The role of your accountant is not restricted to receiving global payments. You need to ensure regular and clear communication with them. Here's why:

The following is a list of tools and integrations that you can leverage for effective communication with your accountant:

Also read: <a href="https://www.skydo.com/blog/top-accounting-tools-for-tech-exporters">Top Accounting Tools for a Streamlined Bookkeeping Experience for Tech Exporters</a>

Having a checklist in place to receive money from the US makes the process more effective and simpler. It gives the accountant a proper idea of the actions to be taken to receive money and how to tackle various hurdles faced while receiving payments.&nbsp;

Skydo provides live foreign exchange rates and charges a flat fee per transaction, thus ensuring smooth <a href="https://www.skydo.com/blog/how-much-forex-fees-do-you-pay-on-global-transactions">international payments</a>. It becomes easier for you and your accountant to keep track of international payments and optimise your cash flow. This further helps your business grow and tap opportunities in the market at an early stage.&nbsp;

Q1. How does currency conversion affect international transactions?

Ans: Currency conversion significantly impacts international transactions by introducing potential discrepancies and affecting the final amount received. Exchange rates fluctuate, leading to variations in the converted amount. This dynamic process can result in financial discrepancies, affecting the accuracy of recorded transactions.&nbsp;

Q2. Are there legal considerations for receiving payments from the US?

Ans: Yes, legal considerations are crucial when receiving payments from the US. Businesses must adhere to regulatory requirements and tax obligations.&nbsp;

In the context of international transactions, compliance with the Import Export Code (IEC), understanding GST regulations, and furnishing necessary documents, such as a <a href="https://www.skydo.com/blog/all-you-need-to-know-about-lut-for-tech-service-export">Letter of Undertaking (LUT)</a> or bond, is essential. Ensuring proper agreements with US clients and meeting legal prerequisites is vital to facilitate smooth and compliant cross-border financial transactions.

Q3. What is the difference between import LC and export LC?

Ans: Import LC (Letter of Credit) and Export LC refer to financial instruments in international trade. An Import LC is issued by the buyer's bank, ensuring payment to the seller upon receipt of specified documents.

Conversely, an Export LC is issued by the seller's bank, guaranteeing payment upon fulfilling agreed-upon conditions. Import LC protects the buyer, while Export LC safeguards the seller, providing a secure framework for global transactions and mitigating risks for both parties.

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If you are an Indian exporter or a freelancer working with international clients, you must have come across the term 'FIRA' or '<a href="https://www.skydo.com/blog/inward-remittance-in-india">foreign inward remittance</a> Advice.' Before we dive into how you can get your automated FIRA from Skydo, let's take a moment to understand what FIRA is and why it matters to you as an exporter or freelancer.

FIRA, or Foreign Inward Remittance Advice, is a document issued by banks as proof of receiving international payments. It is essential for exporters to obtain FIRA after each <a href="https://www.skydo.com/blog/cross-border-payments">cross-border payment</a>. Beyond serving as a payment receipt, it is also a crucial document for claiming export-related incentives, such as tax exemptions on foreign currency payments received in India.

Note that banks issue FIRA for export collections only. If you are receiving inward remittances from FDI (Foreign Direct Investment) and FII (Foreign Institutional Investors), meaning your foreign payments are accruing as returns from overseas investments, you will need an FIRC (Foreign Inward Remittance Certificate) instead of FIRA. You can read all about it <a href="https://www.skydo.com/blog/all-you-need-to-know-about-firc-a-complete-guide">here</a>.

Anyone receiving foreign payments needs a FIRA. Beyond exporters, many individuals and entities may <a href="https://www.skydo.com/receive-international-payments-in-india">receive international payments</a> without realising it.&nbsp;

Overall, the following typically require a FIRA:

Beyond compliance, here’s why FIRA is crucial for exporters:

Receiving your export payment directly through your bank can make obtaining a FIRA a lengthy process. You need to submit a request to the bank, and the bank typically takes 7-15 days to provide the FIRA. You may also need to follow up multiple times, and banks often charge at least INR 400 to issue the FIRA, depending on the institution.

Skydo lets you bypass this laborious and borderline frustrating process with its automated FIRA! Here’s how:

When transacting through Skydo, it automatically generates FIRA for all international payments when they reach your bank account. The document details will be according to the information mentioned in the invoices and payment receipt details. You can easily go to the Skydo dashboard and download FIRA receipts for all or specific transactions.

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Obtaining FIRA from banks can be lengthy and cumbersome. Exporters need to provide multiple details, including account information, purpose codes, and transaction numbers. For those receiving various international payments from multiple clients, keeping track of these details can be exhausting and prone to human error. Incorrect details during bank verification can lead to delays in claiming tax benefits and adhering to compliance requirements.

Skydo simplifies this process by automatically capturing information from invoices and payment receipts, reducing manual effort and increasing document accuracy. Say goodbye to lengthy forms, long waiting periods, and additional charges for obtaining your FIRA.

When you receive an export payment through Skydo, we automatically generate the required FIRA for you at no extra cost. Simply log into our user-friendly dashboard, and you'll find your free and automated FIRA ready to download against every transaction, complete with all the necessary details.

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Taking your business global is challenging, and the compliance requirements can make it even more challenging. That’s why at Skydo, our goal is to help you focus on growing your business, instead of grappling with compliance whereabouts.&nbsp;

With Skydo, enjoy seamless and compliant international payments, delivered promptly and without any <a href="https://www.skydo.com/blog/hidden-fees-in-bank-rates">hidden fees</a>. <a href="https://www.skydo.com/?utm_campaign=demo_click">Switch to Skydo</a> and experience the difference.

Q1. What is FIRA, and why is it important for exporters?

Ans:&nbsp;FIRA, or Foreign Inward Remittance Advice, is crucial for exporters as it serves as proof of incoming foreign funds. It ensures transparency and compliance with regulatory requirements, facilitating smooth international transactions.

Q2. How does Skydo simplify the FIRA generation process for exporters?

Ans:Skydo streamlines FIRA generation for exporters by automating the process. Through its user-friendly platform, exporters can efficiently obtain the necessary documentation, reducing time and effort in compliance.

Q3. What challenges do exporters face with the traditional FIRA generation process?

Ans:Exporters face challenges with traditional FIRC processes, including manual paperwork, delays, and complexity. Skydo addresses these issues by offering a seamless and automated solution, enhancing efficiency and accuracy.

Q4. How does Skydo facilitate compliance with GST regulations for exporters?

Ans:&nbsp;Skydo aids exporters in GST compliance by integrating features that ensure accurate tax reporting. Its platform automates the reconciliation of international transactions, reducing the risk of errors and facilitating smoother compliance.

Q5. What role does Skydo play in simplifying international payments for freelancers and businesses?

Ans:Skydo simplifies international payments for freelancers and businesses by providing a secure and user-friendly platform. It enables seamless cross-border transactions, offering transparency and convenience in managing global payments.

Q6. How can I request a demo of Skydo's international payments solutions?

Ans:To request a demo of Skydo's international payment solution, visit the official website and navigate to the "Demo Request" section. Fill in the required details, and a representative will contact you to schedule a demonstration.

Q7. What is the significance of Skydo's automated FIRA generation for businesses in the international payments realm?

Ans:&nbsp;Skydo's automated FIRA generation holds significance for businesses in international payments by ensuring accuracy, reducing manual efforts, and expediting the overall process. It enhances transparency, compliance, and efficiency, making it a valuable asset in cross-border transactions.

An appellate authority later overruled the initial claim. However, the case highlights the importance of meticulous documentation and record-keeping of FIRAs for exporters to claim refunds and comply with Indian tax laws.&nbsp;

Yet, recording FIRA for each foreign inward remittance is challenging. Hence, in 2017, the <a href="https://fedai.org.in/DocumentUploadFiles/SPL_04_2016_21_APRIL_2016.pdf">Foreign Exchange Dealers’ Association of India (FEDAI)</a> discontinued physical FIRAs and notified the authorised banks to issue e-FIRC or FIRA to exporters, which is still a lengthy and challenging process. To resolve challenges for exporters, modern payment platforms like Skydo have automated the FIRA generation process.

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In 2010, the Reserve Bank of India (RBI) recognized the surge in e-commerce transactions and decided to establish a framework. They introduced regulations titled "Processing and Settlement of Export Related Receipts Facilitated by Online Payment Gateways."

In essence, these rules allowed specific banks to collaborate with online payment gateway service providers (OPGSPs) to streamline the export-related earnings.

By 2015, the RBI expanded these regulations to include import-related payments as well. They authorized AD Category-I banks to offer similar facilities for imports through agreements with OPGSPs.

This strategic move extended the RBI’s regulatory scope, simplifying international trade transactions for businesses.

Per the OPGSP guidelines, AD Category-I banks serve as intermediaries between the OPGSPs and the RBI, exercising quasi-regulatory control over the operations. However, despite these efforts, challenges persist, hindering smooth <a href="https://www.skydo.com/blog/future-of-cross-border-payments-2030-and-beyond">cross-border transactions</a>, particularly in emerging business scenarios.

One significant hurdle is the management of risks associated with returns and chargebacks. Many banks remain hesitant to fully embrace the OPGSP framework due to these unresolved challenges.

Consequently, most Indian tech export companies were forced to rely on one of the three options -

The latter seems like an attractive option while also providing additional benefits such as an international presence for the business. 

Currently, the OPGSP facility serves as the primary payment method for more than 300,000 Micro, Small, and Medium-Sized Enterprises (MSME) exporters throughout India. Despite recent geopolitical tensions in Europe and a global economic recession, India has emerged as a leader in small-value online service exports, aided by the widespread availability of the internet and smartphones even in remote areas.

Introducing OEIF: Potential Reconfiguration

In early 2023, RBI released draft guidelines on the Online Export-Import Facilitators (OEIF), proposing an evolution beyond the OPGSP framework. OEIFs, defined as payment aggregators enabling low-value export and import remittances, might replace the existing system.&nbsp;

While several parts of this draft are quite progressive and well-received by the payments industry, some aspects are not fully clear, and some aspects seem to take a conservative view.&nbsp;

Two major changes that are quite positive and will make OPGSPs more useful to exporters are as follows.

However, the RBI aimed to further simplify the OPGSP guidelines for small digital payments linked to import/export transactions through e-commerce and protect the interests of Indian stakeholders.&nbsp;

Yet, some rules under the Draft Guidelines put more burden on the OEIF entities than the previous OPGSP regime. Such as,&nbsp;

These steps could increase some indirect compliances that apply to PA firms and present practical difficulties for the OEIF entities concerning implementing the guidelines.&nbsp;

At the end of October 2023, the Reserve Bank of India (RBI) unveiled the <a href="https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12561&amp;Mode=0">Regulations on Payment Aggregators</a>—Cross-Border, aimed at governing payment aggregators facilitating cross-border transactions for goods and services.&nbsp;

These regulations effectively replace the earlier draft Overseas Electronic <a href="https://www.skydo.com/blog/inward-remittance-in-india">inward remittance</a> (OEIF) Guidelines.

Under these new rules, Payment Aggregators (PAs) holding in-principle PA approval or those who have submitted PA applications and wish to engage in <a href="https://www.skydo.com/blog/cross-border-payments">cross-border payments</a> must secure approval from the RBI within 60 days. For new entrants, prior approval from the RBI is mandatory.

The regulations categorise PAs into three segments:&nbsp;

Each one has specific account maintenance requirements. Additionally, PA-CB entities are now considered designated payment systems under the Payment and Settlement Systems Act (PSSA).

The RBI's recent rule changes, specifically the Regulation on PA-CBs, show that they've listened to feedback from stakeholders. This update resolves difficult requirements and unclear parts in the earlier draft OEIF Circular.&nbsp;

Now, companies involved in import-export deals must get approval from the RBI to act as a PA-CB. This means they have to follow RBI rules, which changes how they do business.

Note: We are still analysing the impact and potential changes due to this circular and we will update this article when the changes materialise

Ans: An OPGSP stands for Online Payment Gateway Service Provider. It is a type of payment aggregator that facilitates online payment transactions for import and export-related payments, regulated by the Reserve Bank of India (RBI) under specific guidelines.

Ans: In RBI, OPGSP full form is Online Payment Gateway Service Providers, which are payment aggregators that enable the processing and settlement of import and export-related payments, as per the RBI's regulatory framework and guidelines.

Ans: The RBI has set transactional thresholds for OPGSPs, with different limits for import and export transactions. The transaction limits were proposed to be raised from USD 2,000 to USD 3,000 for imports and from USD 10,000 to USD 15,000 for exports under the draft guidelines.

Q4. What are the documents required for opening an account in Online Payment Gateway Service Providers (OPGSP)?

Ans: The specific documents required for opening an account with OPGSPs may vary, but typically, they may include identification and business documents, as well as compliance with RBI's KYC requirements and other regulatory guidelines.

Q5. What type of accounts can be opened by OPGSP?

Ans: OPGSPs facilitate accounts for processing online payments, primarily for import and export-related transactions, as governed by the RBI's guidelines.

Q6. How Export Bill Regularisation would happen for end exporters receiving money through OPGSP?

Ans: Export Bill Regularisation for end exporters receiving money through OPGSPs would involve compliance with the RBI's guidelines, ensuring the proper transfer of funds from the <a href="https://www.skydo.com/blog/nostro-account-international-transactions">nostro account</a> held by the authorized dealer bank (AD bank) outside India to the exporter's bank account in India, with a reduced timeline from seven to five days for export transactions, as per the draft guidelines.

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