International Trade Payment: Strategic Application of 5 Common Methods

by Axton Global
international trade payment methods
International trade has expanded exponentially over a 70-year timeframe. One of the main reasons for this expansion in international trade is trade agreements, through which countries agree to reduce trade barriers. This increase means that paying for international imports from sellers has also increased. It is a process that needs to be efficient and happen at the right time.

If you want to empower your payment processes as an import business and succeed in the international marketplace, considering international payment methods is ideal. In this article, we will explore the common methods of payment in international trade that your import business can rely on.

Which Factors are Important for Importers During International Trade?

During international trade and payment, importers must create cash flow that favors their business. You need to minimize the risks that come with the delay between paying and receiving goods. Your business requires goods quickly and may aim to resell them before you pay the exporter. With this approach and acknowledging these factors, you can implement strategies to ensure you have enough funds to pay them.

Considering these factors, the key to efficient, smooth transactions is using the right ways of payment in international trade for your company.

5 Common Payment Methods Used in International Trade

As an importer, you can choose from five common methods of paying exporters during international trading. Each of these specific, individual approaches has advantages and disadvantages. Therefore, consider the options listed below and their pros and cons to find and use the right option to pay sellers.

Cash in Advance

Using cash in advance payment terms for international trade means that you and your business pay exporters before you own the goods. Wire transfer and credit card methods are some of the most frequently used cash in advance options. In recent years, escrow services via internet connections have also become more common. They are secure methods to pay, ensuring your funds reach the seller directly.

Open Account Terms

With open account terms, your seller will ship and deliver the goods before you make payment. You will notice that the timeframe between delivery and payment can vary. Some typical timeframes are either 90, 60, or 30 days. Some deferred timeframes for paying Chinese suppliers can even extend to 180 days. This international trade payment strategy is favorable for your business and cash flow. It is cost-effective because you can sell goods before the due supplier fee.
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Selecting consignment means your seller or exporter will retain ownership of the goods until you sell them. The seller will ship you the items, and you will pay only when you sell the products to end customers. Many importers consider this one of the favorable modes of payment in international trade. They gain the advantage of delaying paying for goods until they are sold. Therefore, this option is less risky for you as an importer.

Documentary Collections

With documentary collections, your business will receive documents from the seller’s remitting bank that will inform you that payment is required. Your business will not need to pay the seller directly for the goods. Instead, the exporter’s bank will collect your money on their behalf. With this method, in many cases, you will receive the goods after you pay. However, if you have a specific agreement with the seller, you may defer the payment process until the agreed date.

Letters of Credit

Using letters of credit, you can request that specific conditions are met before you pay the exporter for their goods. Your bank will issue a guarantee that your business will pay the required value. The seller or exporter will ship the goods and provide you with an inspection certificate, bill of lading, and other documents. They will ship these documents to you, and then you pay the exporter.

How is the Cash in Advance Method of Payment in International Trade Different from Open Account Terms?

While the open account terms strategy allows you to defer the payment process for 90, 60, or 30 days, cash-in-advance payment in international trade requires your business to pay the seller before you receive the goods. You will notice that open account terms are more favorable because they enable you to receive the goods and potentially sell them before paying exporters.

With Axton Global, your business can gain access to such terms. Our consulting services ensure your business receives the goods it needs from suppliers in China using Sinosure. We help your business use delayed paying processes that last 90 to 120 days with credit limits by offering you advanced tools and assessment services.

Access Deferred Payment Processes when Trading Internationally via Axton Global

Our expert consulting services are ideal if your import business requires access to deferred payment processes when trading internationally or importing goods from suppliers in China. We can enhance your trading terms with our advanced credit tool.

Whether you are an importing business from the United Kingdom, United States, Australia, or elsewhere, we can assist you. Book a consultation with Axton Global to discover more about our services. Let our professionals and tools help you access favorable trading and importing conditions when paying exporters to ensure your company thrives.

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