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Remittance slip example for Export

methods of receiving export payments our young entrepreneur niku has got an export order the prices and I NCO terms have been negotiated nick who has some doubts bothering her about the various methods of receiving payment does she received payment before shipment or after can she be sure of payment after shipments to answer her questions we first explain what the various methods of payment in trade are one cash in advance here bio makes the payment before the seller ships out the codes that is risk here for the buyer such terms are offered usually when the seller has a proven track record or the buyer knows and trusts the seller to open account this is the opposite of cash in advance here the seller ships the goods and then sends the documents such as invoice and bill of lading directly to the buyer before the payment is made buyer agrees to pay the seller at a future date as mentioned in the sales contract usually 30 to 90 days after receiving goods however foreign buyers may press for open account terms since the extension of credit by the seller to the buyer is common an export credit insurance may lessen the risk of non-payment to niku 3 consignment consignment is a variation of open account in which payment is made after the goods have been sold by the foreign distributor buyer to the end customer this helps reduce the direct cost of storing and managing inventory for the distributor buyer for the seller however the risk of non-payment in payment is even greater this risk would be lesser if the distributor is repeated with a proven track record nick who may lessen the risk of non-payment using export credit insurance that covers for the goods in transit as well as when in position of the foreign distributor buyer for documentary collections here the seller entrusts the payment collection to his bank Nico's Bank would send documents and collection instructions to the buyers bank these collection instructions specify when the ownership of the goods changes and when the buyers money should be limited the buyers bank would carry out the instructions upon receiving payment from buyer and remitted to Nico's Bank there are two types of documentary collections one documents against payment buyer is required to pay as soon as the ownership documents are presented to the buyers bank to documents against acceptance buyer is required to accept a time Draft as soon as the ownership documents are presented to the buyers bank payment should be made at the maturity of the accepted time Draft the time Draft is usually for 30 to 90 days banks charge a fee for such transactions documentary collection doesn't offer a verification process and there is limited recourse in case of a payment default on the other hand they are usually cheaper than instruments like letters of credit letters of credit an LC payment involves the buyers bank and Nichols Bank under LC a commitment is given by the buyers bank that payment will be made to niku provided that the terms and conditions stated in the LC have been met niku then ships the goods and submits the documents such as invoice bill of lading etc to her bank as proof of shipment once documents are submitted payment is released the LC protects the seller against non-payment as the banks make the payment without discretion of de bhaiyya n LC also protects the buyer since no payment obligation arises until the goods have been shipped by seller as promised so it balances the risk for both sides and is more secure though not risk-free banks charge a fee for LCS which is usually more than in other methods we shall discuss letters of credit in more detail later Nico and buyer can decide upon any method and should mention the same on her commercial invoice lastly she should consider taking export credit insurance when required [Music]