Not exactly. The IATA clearing house is a central accounting agency whose only job is to make sense of interline accounts. They don't ever handle any money and the member airlines all pay an annual fee to cover the overhead costs.

Take for example that you are flying on a single CX-issued ticket LAX-CX-HKG-SQ-SIN. You pay the entire amount for that ticket to CX and they issue the ticket all the way through to SIN, including the segment on SQ metal. When SQ lifts that flight coupon from you (at time of boarding usually), they will then forward the coupon to the IATA clearing house for reconciliation of accounts. This may seem simple when looking only at two airlines, but when you consider the hundreds of member air carriers - the clearing house plays a very key role in settling accounts between airlines with the minimum number of transactions.

In the case of your excess baggage example, CX will issue an MCO (Miscallaneous Charge Order) for the amount collected from you and attach a copy of that to the flight coupon for the SQ segment (or make an electronic reference to the document number if it is an e-ticket). When SQ collects the coupon, they will also receive the MCO and will forward it to the clearing house who will then credit them with the relevant pro-rated value.