Choosing the right payment option allows you to be safe in the face of possible problems. Certain payment options will protect you from financial losses.
Importing goods can be a complicated and daunting task for many. After all, the process involves many different steps, risks, laws, and regulations to consider. While choosing the products to import and choosing the right suppliers are quite important, choosing the right payment option is also crucial for a safe and risk-free process.
There will always be risks since there are many variables to consider. However, it is in your hands to minimize these risks as much as possible. One of the important ways of minimizing risks is choosing a safe payment method. Importing a product from a different country requires you to be more thoughtful about the payment. It is not as simple as buying a product online. You need to consider the loading of the goods, the shipment process, possible damages that can occur and other problems that may arise during the process.
Choosing the right payment option allows you to be safe in the face of possible problems. Certain payment options will protect you from financial losses. Therefore, you need to take the time to choose the perfect payment option for your situation. We have prepared this guide to help you make safe international payments for your imports. Let us take a deeper look into the payment options you can consider.
There are certain risks involved that you need to be aware of and consider before making a final decision as to the payment method. The risks involved in the process will allow you to understand the losses you might experience and take precautions accordingly. We can examine the risks under three main headings: financial, commercial and political risks.
After acknowledging the risks that are involved in the import process, you can start thinking about payment options. While each payment method has its advantages and disadvantages, it is better to choose one based on your situation. To help you choose the safest international payment option, we have listed the most frequently used methods in international trade. These payment methods are considered to be the safest for an importer. Read on to decide which one fits you the best.
Letter of Credit, also known as LC, is considered to be the safest payment option. This is because the Letter of Credit is designed to protect both the buyer and the seller during the process. The Letter of Credit is a document issued by a bank that guarantees the exporter will be paid once the products arrive as intended.
In this type of agreement, the bank is responsible for the payment on behalf of the importer. Once the exporter fulfills their requirements as it was stated in the agreement, the bank verifies it and makes the payment. Therefore, the Letter of Credit protects the buyer. If the buyer doesn’t receive the goods as agreed, the payment is not made to the exporter. If you want to learn more about the Letter of Credit, you can read a detailed article by clicking here.
Documentary collection is another international payment method that creates a balance between importers and exporters. The payment process takes place between the banks of both parties. In the process, the exporter starts the shipping process and sends out all the necessary documents to the importer. On the other hand, the importer gives authority to the bank to make the payment once the documents are confirmed. Confirmed documents are sent to the importer to claim.
This type of payment exposes both parties to less risk. The exporter sends the goods knowing that the payment is secured and the importer pays after confirming the documents. Documentary Collections is known to take less time to set up and cost less than Letter of Credit. However, it should be noted that this payment method is focused on the documents and not goods directly.
Open Account is a payment method that is favorable for the importer. Because according to this method, the seller delivers the goods to the buyer without being paid. The payment is done after a certain time on an agreed date. The agreed date can be anywhere from 30 days to 90 days after delivery.
This can be beneficial for the importer in many ways. For example, before the payment date, the buyer can start selling the goods. On a different note, the buyer doesn’t need working capital as they don’t have to make the payment as soon as the goods arrive. Thus, an open account is quite liked among importers due to its flexibility. While this method is not exactly favorable for exporters, the sellers who want to build a network of trust and attract more customers might prefer open account payment.
Consignment is another payment method that favors importers. According to this payment method, the exporter delivers the products to the importer. However, the importer doesn’t make a payment until they sell all the goods. This allows the importer to make the payment for imported goods much easier.
However, it should be noted that this type of payment is extremely risky for exporters. After the shipment, the exporter remains to be the owner of the products. This means that if any damage occurs, it is a loss of the exporter and not the importer. Therefore, this method is rarely used and it is usually preferred by exporters with third-party agents or distributors in other countries.
Part of making a safe payment in international trade is working with professionals. Turkish Goods has a professional team that takes care of the entire import process once you choose the products you wish to import from Turkey. Turkish Goods also offers the safest payment methods such as the Letter of Credit to make the buyers feel secure every step of the way. No matter where you are in the world, you can safely import products from Turkey via Turkish Goods.