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Friday, 14 September 2018

Sales and Payment Terms

 the base on which an international marketer can sell his products are explained below;

 Cash in advance
 Cash in advance affords the exporter the greatest protection because payment is received either before shipment or upon arrival of goods. This method also allows the exporter to avoid trying all pitch on funds. All through life common than in the past, cash payment upon presentation of documents, it still widespread. Customs are insisted upon where there is political instability in the importing country or where the buyers creditworthiness is doubtful. Political crisis or exchange control in the purchases country may cause payment delays or even prevent fund transfers, leading to a demand for cash in advance. In addition, where goods are made to order, prepayment is usually demanded, both to finance production and to reduce marketing risk.

 The volume of international business handled on cash in advance basis is not large. Cash places on popular burdens on the customer and typically is used to when credit is doubtful, exchange restrictions with the country of this nation are such that the return of funds from abroad made be delayed forearm on reasonable., or when the exporter for any reason is unwilling to sell on credit terms. All through full payment in advance is employed, infrequently partial payment 25 to 50% in advance is not usual when the character of the merchandise is such that and incomplete contract can result in heavy loss. For example, complicated machinery or equipment manufactured to specification or special design would necessitate advance payment which would be in fact, a non refundable deposit.

 Open account terms
 Open account selling is shipping goods first and billing the importer later. The credit terms are arranged between the buyer and the seller but the seller has little evidence of the importance of ligation to pay a certain sum at a certain date. Sales on open account therefore, i made only to a foreign affiliates or to a customer with whom the exporter has a long history of favourable business dealings. However, open account cells have greatly expanded due to the major increase in international trade, the improvement in credit information about importance and the greater familiarities with exporting in general. The benefits include greater flexibility no specific payment dataset and involves lower costs, including power bank charges done with other modes of payment. As with shipping on consignment, the possibility of currency controls in an important factor because of low priority in allocating foreign exchange normally accorded to this type of transaction . Sales on open account are not generally made in foreign trade except 2 customers of long standing with excellent credit reputations or to a subsidiary or branch of the exporter. It lives the seller in a position where most of the problems of international commercial finance work to their disadvantage.

 Four method of payment or money transfer available under cash in advance or open account terms or conditions of sale with their unique characteristics and implications in export finance are as follows;

 buyer's own cheque
 Payment with buyers on cheque may not be possible where the foreign exchange law of the country prohibit it . It may need special certification by the buyer's bank. Payment by this method delays the receipt of the money by the exporter since he has to send the check back on receipt through his bank to the country of the buyer for clearing. This takes a long time and involves the exporter in affordable expenses . This of course, should be taken into account in quoting the export price.

 Banker's draft;
 A banker's draught is preferred to buyer's own cheque since it will be readily purchased for cash by exporters bank. A banker's draft is a cheque drawn in terms of foreign currency by the buyer's bank on it correspondence bank in the exporters country. It could also be a cheque drawn by a bank upon itself in the domestic currency. However, the problem here is that the draft could be lost in the mail And can only be issued after a considerable delay and cost.

Mail transfer mt
 This is the most common method of payment. Did obito instruct his bank to request it corresponding bank in the exporters country to pay a specific amount to the exporter. The advice to pay is usually done by mail the faster the better so as to cut down on the delay involved. The whole procedure is done by entries over banking account the buyer's bank will debit his account and credit the account of the correspondence which bank, or received of the payment instruction, passes a reciprocal entry over its account with the remitting bank and paid the money over to the exporter. The instruction between the bank may be ordinary mail swift or air mail.

Telegraphic transfer tt
 Payment by telegraphic transfer tt is faster than male transfers empty because the instruction is sent by cable. In both male transfer and telegraph transfer, the importance pays his bank the domestic equivalent of the foreign exchange value of the impulse. The bank charge involved in the transfer or either paid by importer or exporter depending on the contract agreement. From the foregoing explanations, it is clear that the produce is similar to that of mail transfer except that the instructions and sent by text or fax . This means that the payment is affected more quickly here.

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