Methods of Payment/Cash in Advance(Prepayment)
|Unit 4.1- Methods of Payment|
Cash in Advance/Prepayment
Cash in Advance/Prepayment occurs when a buyer sends payment in the agreed currency and through agreed method to a seller before the product is manufactured and/or shipped. Upon receipt of payment this seller then ships the goods and all the necessary shipping and commercial documents directly to the buyer.
|Time of Payment||*Prior to manufacturing and/or shipping, through the agreed upon method (cash, wire transfer, check, credit card, etc.).|
| Goods Available
|*After payment is received.|
|Risks to Seller||*Product is manufactured and never paid for.|
|Risks to Buyer|| *Seller does not ship per the order (quantity, product, quality, shipping method).|
*Seller does not ship when requested.
| When Appropriate
to Quote or Use
| *When there is no established relationship between the buyer and seller.|
*Product is a special order and can only be sold to this specific buyer since it contains company logo, etc.
*Seller is confident that importing country will impose regulations deferring or blocking transfer of payment.
*Seller does not have sufficient liquidity or access to outside financing to extend deferred payment terms.
|Financing||*Buyer must have cash or financing available.|