A term of payment, also sometimes called payment term, is documentation that details how and when your customers pay for your goods or services. With this outline, your business can receive payment more easily and make the payment process more transparent to customers.
Methods of Payment
If the orders are not high in value or small in quantity, two methods of payment are usually used in cash or by bank transfer. The payment method is based on the level of trust between the parties, the ability to pay or depending on the type of transaction goods.
Cash payment method is applied when signing a contract, placing an order (WO – Cash with order), delivering goods (COD – cash on delivery) or the seller presents documents (CAD – cash against documents).
International trade due to financial difference, scale, value for money, culture,The parties apply a more professional method with support from 3rd parties. can be international Banks, credit institutions:
– Telegraphic Transfer (T/T)
– Mail Transfer (M/T)
– Collection of payment.
– Letter of credit (L/C)
– Methods according to international payment practices.
Payment often has problems such as: delay, overdue payment, dispute with the parties. In order to encourage on-time payment, all parties can agree on priority content in cases of payment in how many days and specific time to complete the transaction.
– Prepayment: The buyer will pay in advance the value of the goods, the seller receives when not yet delivered to have the appropriate purchase price. This method is often applied when the buyer is in a weak position or the importance of the goods, the buyer’s reputation is high.
– Pay directly: the buyer pays at the time of receiving the goods or receiving the payment documents. This method is applied to many international payment methods to ensure the interests of both parties.
– Postpaid: the seller grants credit to the buyer. The price of postpaid goods is always higher than the price of prepaid and immediate goods.
If the method of payment in cash is applied, the parties need to agree on whether the payment location is the seller’s location or the delivery location. The buyer’s head office or another location agreed upon by the two parties.
If using the form of payment via banking, the two sides can be flexible in choosing a product payment location.
Establishing payment terms is an important step that brings many benefits to the transaction parties, creating a civilized and effective trading environment. In case the parties do not reach an agreement, the provisions of law will apply when a dispute occurs.