Finance · 7 min read
Getting paid: terms, risk and letters of credit
Advance payment, documentary collection or letter of credit — matching the payment term to the buyer's risk.
The risk ladder
Advance payment is safest for you and hardest to sell. Open account is the reverse. Documentary collection and letters of credit sit in between and are where most new export relationships settle.
A common pattern is 30% advance with the balance against a copy of the bill of lading, moving to open account once trust is established.
Working with a letter of credit
A letter of credit pays against documents, not against goods. Banks check wording with no tolerance for discrepancy, so review the draft credit before the buyer opens it.
Watch the latest shipment date, the presentation period and any inspection certificate clause that puts the buyer in control of your payment.
Realisation and compliance
Export proceeds must generally be realised within nine months and reconciled against the shipping bill in the bank's EDPMS system.
Unreconciled entries build up quietly and eventually block new shipments, so review the position with your bank every quarter.
Need this applied to your order?
Our trade desk prepares the paperwork for your specific product and destination.
Talk to the trade desk