Know Your Payment Terms

Payment terms outline the conditions under which a buyer will pay a seller for goods or services. These terms specify the amount due, the date by which payment should be made, and any discounts or penalties associated with early or late payments.

In international trade, payment terms are essential to ensure both parties agree on when and how payments will be made. Keskan Finance gives the ability to have multiple payment terms at the lowest risk to your company!

Common payment terms include:

1. Advance Payment

• Description: Buyer pays the seller before goods are shipped.

• Use Case: Used when the buyer has a lower credit rating, or the seller needs to secure payment before shipment.

  Keskan Finance Risk Rating is Level 1

2. Cash on Delivery (COD)

• Description: Buyer pays upon receiving the goods.

• Use Case: Common in domestic trade where the buyer and seller have an established trust.

  Keskan Finance Risk Rating is Level 2

3. Open Account

• Description: Seller ships goods and expects payment at a later date, usually within 30, 60, or 90 days.

• Use Case: Often used when there is a high level of trust and creditworthiness between the two parties.

  Keskan Finance Risk Rating is Level 9

4. Documentary Collection (D/P or D/A)

• Documents Against Payment (D/P): The buyer receives the shipping documents only after paying.

• Documents Against Acceptance (D/A): The buyer accepts a bill of exchange and pays on the specified future date.

• Use Case: Common in international trade for medium-risk transactions.

  Keskan Finance Risk Rating is Level 3

5. Letter of Credit (LC)

• Description: A bank guarantees payment to the seller if the seller meets specific terms and conditions.

• Use Case: Often used in international trade to reduce risk and ensure payment upon delivery or shipment of goods.

  Keskan Finance Risk Rating is Level 2

6. Consignment

• Description: The seller ships goods to the buyer but retains ownership until the goods are sold to the end customer.

• Use Case: Used when the buyer is an agent or distributor, often for goods like retail products.

  Keskan Finance Risk Rating is Level 4

7. Instalment Payment

• Description: The buyer pays in multiple payments over a period.

• Use Case: Useful for high-value goods or long-term contracts.

  Keskan Finance Risk Rating is Level 5

8. Deferred Payment

• Description: Payment is delayed for an agreed period after delivery.

• Use Case: Provides buyers with additional time to sell or utilise the product before paying.

  Keskan Finance Risk Rating is Level 8

The selection of payment terms depends on factors such as the relationship between buyer and seller, the risk level, industry norms, and the buyer's creditworthiness.

If you want the ability to leverage the power of Keskan Finance to grow your business, get in touch us by filling out the form here.