Associated with the movement of goods or the provision of services in international trade is the corresponding flow of funds. This two-part article (non-documentary methods and documentary methods) aims to provide a first introduction to the most common international payment and collection methods.
An international payment or collection method is an instrument denominated in foreign currencies, duly accepted by the seller (exporter) as sufficient to settle the buyer’s (importer’s) debt.
Payment and collection methods are classified asSimpleandDocumentary. Let us now look at simple payment methods:
SIMPLE PAYMENT METHODS
These are considered simple when only the financial document representing the debt payment is sent for collection, without the accompanying commercial documents covering the shipment of goods.
Simple payment methods:
- Personal check
- Bank check
- Simple payment order
- Clean collection (simple collection)
CHECKS
There are 2 types: personal checks and bank checks.
- Personal check: issued by a legal entity or individual against a current account where funds are available (not very common in international operations).
- Bank check: a payment order issued by the drawer (issuer) in favor of a specific person (registered check) or the bearer.
- In Latin America, they are known ascashier’s checks/manager’s checks.
SIMPLE PAYMENT ORDER
Also defined as a transfer. It is a payment method consisting of a request made by the importer to their bank, instructing it to pay a third party (the exporter) a specific amount of money.
CLEAN COLLECTION (SIMPLE COLLECTION)
This consists of sending financial documents (bills of exchange, promissory notes, checks, financial receipts, etc.) for collection.
Collections may be payable at sight or at term.
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