- Ease of implementation by the buyer: its formalism is considerably reduced compared to the documentary credit.
- No use of bank credit line.
- Ease of use by the seller.
- Banks do not control the documents as for a documentary credit.
- Cost is low.
My DSO Manager, the innovative debt collection software
My DSO Manager offers powerful and flexible features for credit management and debt collection management.
It is very easy to implement and user friendly.
Dunning ations are triggered depending on the collection scenario assigned to each customer and the situation of the account (overdue invoices ...).
Recovery documents (e-mails, interactive e-mails, postmail letters, SMS, ...) are easy to create and to customize with the use of #Hashtags. See more with the demo.
Disadvantages of cash against documents
The disadvantages are related to the fact that banks are not engaged as for a documentary credit. So there is no bank guarantee of payment or insurance on the proper management of the process by the presenting bank.
- Issuance of documents to the buyer without payment or without acceptance of a draft.
- Refusal of the buyer to take possession of documents and goods. In this case the seller is not paid and finds himself with the material located in the country of the buyer!
- No payment to the seller.
The risks are very important for the seller in a cash against documents. This tool does not provide a good payment security.
How to improve the cash against document?
Several best practices can improve this imperfect instrument.
- Give specific instructions to the presenting bank.
- Send the original documents to the bank and never directly to the buyer.
- Refer to the ICC Rules 522
- Set the period for payment from a generator which is controlled (eg issuance of B / L).
- Ship by sea and label the B / L to order the bank.