Documentary collections, including bills of exchange, are another payment option to consider when you're negotiating your contract of sale.
Collections can either be at sight (D/P or Documents against Payment) or term (D/A or Documents against Acceptance) depending on the payment terms you have agreed in your contract of sale.
Collections can be less expensive than letters of credit. However they do have differing risks for importers or exporters, depending on payment terms and how goods have been shipped.
Collections are sent and received with various instructions to be followed and treated individually.
How it works
- Exporters prepare shipping documents and bills of exchange (if applicable) and give to their bank (the remitting bank) with instructions on how to handle the collection.
- The remitting bank sends the documents to the importer’s bank (the collecting/presenting bank) with instructions on how to collect payment from the importer.
Documentary sight bill
If the collection is "at sight" the importer pays the amount of the collection before they receive shipping documents needed to clear the goods.
Documentary term bill
If the exporter has agreed to extend payment terms to the importer, the importer is usually required to accept a bill of exchange before documents are released.
For more information read our Documentary Collections Fact Sheet (PDF, 327KB).