Lives and Livelihoods

Cash Payment:

Cash payment in advance of shipment requires little explanation; there are few such settlements nowadays. He would be a fortunate exporter indeed who could demand and receive payment on this basis in the buyer’s market prevailing today. Financing under this method is provided by the buyer or by an outside source on the buyer’s account.

Open account:

Open account is generally restricted to cases where there is an inter-company relationship between seller and buyer or where the exporter and foreign importer have had long and favorable dealings together and there are no exchange restrictions that might complicate settlement. Sales on open account are usually settled on the basis of periodic statements of account through bank mail or cable facilities. Financing in this instance is carried by the exporter, who must obviously have sufficient financial strength or creditworthiness to carry the inventory abroad out of his own resources. Otherwise the method presents few financing problems. One disadvantage is that in the event of default by the buyer, there is no bill of exchange on which proof of debt may be established.