Electronic Communications/Communicating Methods of Payment and Fund Remittance
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Unit 4.9-Electronic Communications |
Introduction | Communication and Technology | Communicating Methods | Guidelines and Standards | Summary | Resources | Activities | Assessment |
Communicating Methods of Payment and Fund Remittance
Communication between a seller and buyer need to be clear, so that there is no mistake in expectations especially when payment is being discussed. To expedite this process and to verify understanding, communication is conducted either via fax or more commonly via email. In a situation where hard copies of documents with original signatures are required, the documents are usually sent by courier or overnight delivery such as FedEx rather than through the postal service. In addition, an international manager should use technology to collect credit information about new customers. The accounting department must be properly advised of decisions relating to customers such as payment terms, payment due dates, and international expectations. An international manager may also require accounts receivable and collection support from the accounting department.
Proper communication between parties – the banks, seller and buyer – is critical to insure that there are no break-downs in the documentary process. The agreements that must be reached process include the following:
- payment terms
- the method by which funds will be remitted
- the role of the banks for the transaction
- the role of the freight forwarder for the transaction
- the method by which documents will be transmitted
The decisions of payment terms and method of funds remittance will often dictate the role of the bank and freight forwarder. For example, if a letter of credit is chosen as the method of payment, banks will be involved from the beginning. Using a standard letter of credit or an electronic letter of credit is now an option and must be agreed upon.
Realizing the opportunities available by using the internet, banks have developed highly sophisticated websites, programs and databases that allow buyers and sellers to
- apply for and track letters of credit
- request amendments to letters of credit
- submit documentation
- request and track fund transfers
- track foreign currency fluctuations
- request and track foreign currency transfers
- purchase and manage foreign currency contracts
A freight forwarder has a role in the communication process as well. A freight forwarder is hired to move freight for a shipper by arranging cargo space on a carrier as well as handling the logistics for delivering the goods to the carrier. A freight forwarder is responsible for preparing shipping documents and may also assist in preparing commercial documents on behalf of a seller. If documents are being prepared in conjunction with a letter of credit, it is crucial that the documents be prepared without discrepancy and transmitted per the requirements of the letter of credit. The communication process must be followed exactly.
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