Documentary collections (including bills of exchange) can be an another option to be considered when negotiating a contract of sale. Collections can be either sight or term, also depending on contract of sale terms.

Collections offer a compromise between letters of credit (which can be expensive), pre-payment (high risk to the importer/buyer) and open account (high risk to the exporter/seller). Documents and bills of exchange (if applicable) are prepared by the exporter/seller and presented to the exporter's/seller's bank (remitting bank) with instructions on how to handle the collection. The exporter's/seller's bank sends the documentation to a bank in the country/destination of the importer/buyer (usually the importer's/buyer's bank, known as the collecting/presenting bank) with instructions for presentation to the importer/buyer and collection of payment.

If the collection is at sight, the importer/buyer must pay the amount of the collection, before they receive the documents that are needed to clear the goods.

If the collection is at a previously negotiated agreed term, the importer/buyer is usually required to accept a bill of exchange before documents are released.

Collections are sent and received with various instructions and each collection will be treated individually, depending on the instructions.

Further details regarding documentary collections are detailed in NAB's publication 'Finance of International Trade' which is available through your business banker or you may request a copy by completing the email attached to this website.

Alternatively, you may wish to contact a Supply Chain Finance specialist and this may be organised through your business banker.

For further information regarding documentary collections, or to make an appointment with a Supply Chain Finance specialist, contact us.