Thanks for your reply.

The merge document is created using a word add-in from the external CRM system. This is then logged back to the system (cloud hosted), the template is then populated on the cloud's side using the CRM system, by writing to a particular contact for example using the template. It then exports the document with the merge fields populated with data from contacts selected.

I'm not able to store an image within the cloud database to then reference the path for the image to be inserted for those contacts with "direct debit" as their payment type. So I don't think its possible to to add an image from my local drives using "INCLUDEPICTURE" as the merge execution is not being carried out on my side.

Hope that makes sense..