Cash against documents
|The cash against documents is a management and payment tool for international transactions. Its purpose is for the vendor to get the amount owed by a customer from a bank against delivery of documents (invoices, bill of lading...etc.).
Documents are delivered to the customer only against payment or acceptance of a bill of exchange. In this last case, the bill of exchange may be guaranteed by a bank, which provides the supplier with a significantly higher payment security.
Obtaining documents allow the buyer to take possession of the goods and to clear the shipment at customs.
Cash against document method advantages
Disadvantages of cash against documentsThe 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.
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.
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Excellent piece of explanation. Helped me clear the doubts.
Very good information