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Prepayment or advance payment is a method of payment used in international or domestic transactions where the buyer pays the seller in advance before receiving goods or services. It is a very high-risk method for the importer and with almost no risk for the exporter. Usually an importer can pay the exporter by cash, T/T, Western Union or Money Gram or other payments that is agreed by both parties.
However, T/T is the most common payment method that requires the use of cable or telegraph to remit funds. No hard money transfer is involved in T/T. The order to pay is wired to an institutions’ cashier to make payment to a company or individual. Although telegraph is less in use these days, T/T is regarded as the most convenient means of completing a transaction.
Money Management Consultants Ltd
New Delhi, India
Free Member, Joined :05/11/2007
No of Topics Posted : 113
Reply/Comments : 14
T/T does not necessarily mean that it has to be made in advance to the suppliers.It can also be made after the goods are received. It depends on negotiation. The sellers insist for the payment by T/T due to the fact that the other alternate method i.e. Letter of Credit is expensive for small transactions. In L/c negotiation charges are high and sellers' transaction cost goes high. If one contemplates higher risk in paying by T/T then he can negotiate with the seller for L/c with condition that all bank charges outside India will be to the L/c opener's account.
In this method the transaction cost will be high but your point of risk can be covered.
Free Member, Joined :01/18/2007
No of Topics Posted : 0
Reply/Comments : 4
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