International means of payment
In order to carry out the international sale of merchandise, it is necessary for importing and exporting companies to agree on a means of payment. Given that there are different types of international means of payment, it is important to choose the most appropriate formula that reduces risk for the seller and reduces costs for the buyer , providing interesting room for maneuver for both companies.
THE MAIN MEANS OF PAYMENT IN INTERNATIONAL TRADE
In foreign trade operations, the choice of international means of payment depends fundamentally on the relationship of trust that exists between the importer and the exporter. The safest means of payment is documentary credit, for example, but it also usually has high costs, so its use is not always justified and it may be worth exploring other options.
SIMPLE MEANS OF PAYMENT
These types of payment in international trade are also known as non-documentary , since the sending of the money is linked to the shipment of the merchandise , not to the corresponding documentation, so that they can be made before or after receiving it.
- Check. The buyer can issue different types of checks, from a nominative check in the name of the seller, to a check made up in which the bank guarantees its solvency and withholds the corresponding amount. However, the bank check offers a greater guarantee of collection since the bank commits to its payment.
- Simple remittance. In this case, the seller sends the buyer a collection document, be it a bill of exchange, a receipt or a promissory note, with the agreed amount, term and currency, managing its collection through the respective financial entities.
- Simple payment order. It is one of the most widely used international means of payment for its convenience and simplicity since it consists of an international bank transfer, so that the buyer gives the order to his bank to transfer the amount of money to the seller’s account.
DOCUMENTARY MEANS OF PAYMENT
In documentary means of payment, payment is linked to the delivery of documents and is usually made when the merchandise is delivered . This modality allows the payment and delivery of the goods to be made simultaneously, minimizing the risks for the importing and exporting company.
- Letter of credit. It is one of the safest international means of payment and collection since it is irrevocable. The payment, which is made through the respective banking entities of the buyer and the seller, becomes effective when the conditions agreed by both parties are met and the merchandise has been shipped.
- Documentary payment order. The buyer gives the order to his bank to make the transfer to the seller when he receives the documents and he sends the merchandise. The buyer’s bank will review the documents and, if they are correct, will make the transfer. However, it is a revocable international means of payment.
- Documentary remittance. In this case, the seller delivers to his bank the invoice, receipt or letter together with the documentation of the merchandise after the sale of this, so that it can be delivered to the buyer against the payment of the amount or the acceptance of the exchange bills.
- Bank payment obligation. Also known as BPO, it is an automated procedure that involves an irrevocable payment commitment between the buyer and seller’s banking entities. Payment is executed on the date set in the contract when the electronic documentation has been submitted that shows that the conditions have been met.
If you are interested in everything related to International Trade , with our Higher Degrees you will be able to train to plan and manage these complex processes in companies , also acquiring knowledge about digital commerce, international marketing and transport and logistics plans. We have different face-to-face and online options, so you can find the one that best suits your circumstances:
- HIGHER DEGREE INTERNATIONAL TRADE AT A DISTANCE
- HIGHER DEGREE IN INTERNATIONAL TRADE IN MADRID
- HIGHER DEGREE IN INTERNATIONAL TRADE IN VALENCIA