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Unit 4: PAYMENT IN INTERNATIONAL TRADE - Coggle Diagram
Unit 4: PAYMENT IN INTERNATIONAL TRADE
Definition
A payment method in international trade where goods are shipped and delivered before payment is due.
Typically used between trusted business partners.
Advantages
For Importers (Buyers)
Improved Cash Flow
No upfront payment required, allowing better financial management.
Lower Costs
Avoids fees related to letters of credit or documentary collections.
Stronger Relationships
Builds trust with suppliers, leading to better long-term partnerships.
For Exporters (Sellers)
More Competitive
Attracts more customers by offering flexible payment terms.
Larger Market Reach
Encourages international buyers who might hesitate with upfront payments.
Potential for Increased Sales
Buyers may order more if they don’t have to pay immediately.
Disadvangtages
For Buyers
Dependence on Supplier Trust
Any disputes or delays could affect supply chain operations.
Overcommitment Risk
Easy credit can lead to excessive purchases and financial strain.
For Sellers
High Risk of Non-Payment
The buyer might delay or refuse payment, leading to financial losses.
Cash Flow Issues
Delayed payments can affect business operations and liquidity.
Creditworthiness Dependency
Requires thorough credit checks and risk management strategies.