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You are here: Step 19: Getting paid > Payment terms  
Payment terms

What are payment terms?

Payment terms (or terms of payment) can be defined in two ways. The first and the more narrow view is about the exporter/seller and importer/buyer agreeing to make payment a certain number of days after delivery of the goods. This involves the exporter giving the importer credit for the period in question (e.g. 30 days). Put another way, the exporter is giving the importer a term (or period) in which to settle the account, hence 'payment term'. If there is no payment term, it means that the account must be settle on presentation (also referred to as 'on demand').

The second way of defining 'payment term' is a little broader and essentially refers to the payment conditions which cover not only when payment will take place (that is, on what date - this covers the more narrow definition of 'payment term' which we discussed above), but also addresses certain conditions that must be fulfilled, such as:

  • The method of payment
  • The amount to be paid
  • The place of payment
  • The method of remittance (i.e. how payment will be made)
  • Responsibility for the costs related to the payment (e.g. who pays which cost such as the banking charges)

Note that the terms of payment should not be confused with Incoterms. Incoterms relate solely to the terms of delivery for the buyer and seller. To learn more about Incoterms, click here.

More about methods of remittance and providing credit

In the case where the importer makes a cash payment for your goods (such as with cash in advance or with payment on on open account), there are several different ways in which the importer can pay the money over to you. These methods of remittance are discussed here. These methods of remittance are not really applicable in the case of documentary collections or documentary credits as in these instances there is already a defined method of payment within the banking system.

In the case where you allow the importer time in which to pay (i.e. a payment term or credit period), you need to think this through very carefully. Offering credit is a complex, risky and costly exercise. Before you decide to do so, you should read more about credit terms by clicking here.

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Step 19: Getting paid
      Payment methods
            .Remitting cash payment       
            .Credit terms       

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More information on Step 19
Learning to export... The export process in 21 easy steps
Step 1: Considering exporting
Step 2:Current business viability
Step 3:Export readiness
Step 4:Broad mission statement and initial budget
Step 5:Confirming management's commitment to exports
Step 6: Undertaking an initial SWOT analysis of the firm
Step 7:Selecting and researching potential countries abroad
Step 8: Preparing and implementing your export plan
Step 9: Obtaining financing for your exports
Step 10: Managing your export risk
Step 11: Promoting the firm and its products abroad
Step 12: Negotiating and quoting in exports
Step 13: Revising your export costings and price
Step 14: Obtaining the export order
Step 15: Producing the goods
Step 16: Handling the export logistics
Step 17: Export documentation
Step 18: Providing follow-up support
Step 19: Getting paid
Step 20: Reviewing and improving the export process
Step 21: Export Management
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