There are methods of collecting debts, which may not involve the extension of credit.
An advance payment is where payment is made in advance. This seems ideal, but there are still problems. Suppose the advance payment is not received? What if the order is canceled prior to sending the payment? Time must be allowed to clear the check or draft anyway. From the importer’s point of view, the goods may not be shipped, or the wrong goods may be shipped, or the shipping document may be wrong.
Another method of collecting the debt is through cash on delivery or payment on shipment. The exporter e-mails notice of shipment and awaits payment. The exporter could find themselves having shipped goods, and yet the payment is not right. The bill of lady making the importer title to the dead. From the importer’s point you, the goods and be found to be faulty or the wrong goods.
With open account trading the goods are dispatched and sent an invoice Mark payment within seven days. Full of risk quite suitable for circumstances where it are able trading relationship has set up and trust exists. This is common in United States.
Another way of collecting debts or when a bank’s help is employed in collecting the money and guaranteeing arrangements to a certain extent. Bill of exchange are drawn by the exporter on the importer, with the latter agreeing to pay on demand or at a determinable future time the value of the goods to a specified person or bearer of the bill.
The Usance, tenor or term bill is payable in a number of days or months, usually accepted by a bank, the exporter then sells to a bill broker who holds to maturity or trades.
As one can see there are numerous ways to collect debt.
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