There are four terms of payment in export and import, Advance Payment, Letter of Credit (LC), Documents against Payment (DP) and Documents against Acceptance (DA).
Here we explain payment terms “advance payment” in details, according to importer and exporter`s point to view. we will also discuss, how to issue advance payment against import in Pakistan.
What is Advance Payment (Terms of Payment in Export and Import)
In simple words, when a buyer pays any amount before getting products and services, its called advance payment.
What is the difference between prepayment and advance payment?
Prepayment
Prepayments are amounts purchased by a business before of the products or services being received afterward. Any payment pay in advance will consider a prepayment. A prepayment is a full payment in advance.
Advance Payment
An advance payment, or just an advance, is that the part of a contractually due add that’s paid or received in advance for merchandise or services, whereas the balance includes within the invoice can only follow the delivery.
Advance Payment in Export (Exporter’s Point of View)
With Exporter or Seller’s point of view, advance payment is good for exporter or seller, because exporter can avoid credit risk as a result of payment is received before the possession of the products is transferred. Advance payment is the best term of payment in export business.
Advance Payment in Export (Importer’s Point of View)
As an importer or Buyer’s point of view, advance payment carries little risk, because payment sends in advance before getting the goods.
Following risk involved in advance payment in import business:-
- Not getting goods or services (Fraud Company).
- Delay dispatching goods.
- Send wrong or low-quality product.
How to issue advance payment against import in Pakistan
In order to issue advance payment against import in Pakistan, is not an easy task for import, due to foreign reserve crisis State Bank of Pakistan put some restriction.
We have already discussed the detailed article, State Bank of Pakistan`s Advance Payment Against Imports Circular, so read this article.
What is Advance Payment (Terms of Payment in Export and Import)
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