A constant concern for exporters is to achieve a balance between the security of the collection of the exported goods and the adequate reception by the importer, with the costs involved in the collection operation.
That is why international payment systems arise, which are economic transactions with the outside that involve the exchange of goods or services between buyers and sellers from different countries.
Here is a list of the main international media used to pay for exports:
This form of payment represents many risks for the buyer; who is entirely at the mercy of the good faith of the seller, who may deliberately delay shipment of the goods, or simply, in the worst case, do not do so. The use of this modality is exceptional.
- Direct Payment
The most common means of payment for direct payments are the check. Direct payment means are normally used when payment conditions are cash, current account or consignment.
The direct payment represents a certain form of anticipation with the variant that the one who receives all the advantage is the buyer, leaving the seller in absolute inferiority since he must send the goods and wait for the payment until they have arrived at their destination.
In this modality there are no guarantees; the intervention of a bank is limited to facilitating a turn-over under the client’s instructions.
- Documentary Collections
It represents less risk than direct and anticipated payment since in this modality one or more banks intervene, but this intervention does not constitute a guarantee in the fulfillment of the obligations derived from the purchase-sale agreement agreed between the parties.
This method is favorable to the exporter since, indirectly, it maintains the control of the documents until the external buyer makes the payment.
- The Letter of Credit
It constitutes a guarantee of payment because it is a payment commitment backed by a bank. These guarantees extend as the letters of credit are irrevocable and confirmed. This method of payment is considered low risk because the issuing bank has a legal obligation to pay, as long as all required documents are submitted and all the terms stipulated in the contract are met.