Life Used To Be So Simple...
When annuity vendors emerged 60 years ago, they brought two major value propositions: simplicity and cost savings. Clients sent one instruction list to one vendor who managed all of the payments and agent communications. They paid one invoice, in one currency and benefited from agent fee and outside counsel savings.
But Things Have Changed
Fast forward to today, and clients still send one instruction list to one vendor who manages the payments to all of the agents, but annuity vendors have mastered a number of different ways to make money off of every transaction. Foreign currency charges are a popular way for vendors to increase revenue, and due to the myriad of PTO fees and due dates and constantly changing currency rates, currency costs can be difficult for clients to manage and monitor.
An Easy Way to Save Money
For smaller organizations with modest portfolios, foreign exchange costs may not be large enough to justify changing processes, but for organizations with larger patent portfolios, foreign exchange costs can add hundreds of thousands of dollars to annual invoices. Over the last several years, organizations have begun to notice these fees and we have seen a steady shift towards large patent holders requesting annuity vendors provide invoices in multiple currencies. A very common approach for larger US companies is to receive an invoice in Euros for European payments and an invoice in US Dollars for the rest of the world.
This approach works well for large organizations who are setup to pay in multiple currencies and can save a company a substantial amount of money in excess currency fees. We don’t generally see large patent holders asking to be invoiced in more than 2 or 3 currencies due to the logistics of managing all of the invoices and subsequent debit and credit notes. As mentioned earlier, the savings may not be worth it if an organization has a small international portfolio, so it is important to do your homework and work with your finance team and annuity vendor before making the switch.
A Word of Caution
When you ask your annuity vendor about receiving invoices in multiple currencies, they may push back on the idea and tell you that it is too complicated or that their systems can’t handle it. They are going to lose the foreign currency revenue they were getting, so they will do everything to try to convince you to stick with the traditional single invoice. Nearly every vendor has a way to invoice in multiple currencies, so don’t give up easily – there are many companies these days receiving annuity invoices in multiple currencies.
It’s also important not to get complacent when your vendor does provide you with multiple invoices. We have seen situations where clients were receiving Euro and US Dollar invoices, and the vendor created the Euro invoice by converting the fees paid to the EPO into US Dollars, then converted the US Dollar fees back to Euros for the invoice – effectively adding two exchange rate charges to a transaction that should have had no additional costs. As we said at the beginning, annuity vendors are very good at generating maximum revenue from each transaction. It’s important to always be vigilant and regularly audit your payments against PTO fees.
Wrap Up
While multiple annuity invoices increase the complexity of payments a bit, and may not be for everyone, the approach can be an easy way to decrease your total annuity spend. If you are interested in seeing how much you are paying your annuity vendor in foreign currency costs, our Annuity Watch Service provides you with the data you need to make an informed decision. You can always contact us at support@prokurio.com if you have any questions about invoicing and foreign currency.
