OPEN ACCOUNT, ADVANCE PAYMENT & CONSIGNMENT

1. OPEN ACCOUNT, ADVANCE PAYMENT
&CONSIGNMENT
NABEEL FIRDAUS BIN MOKHTAR 08DPI12F2019
PUTERA ACHRUFF ICHKANDAR BIN ROSLY 08DPI12F2010
MOHD ASWADI BIN ISMAIL 08DPI12F2016
NORHASHIMAH BINTI MOHD ISMAIL 08DPI12F2028
NUR AZILA BINTU RUSLIN 08DPI12F2023

2. Advancepayment
•Is the part of a contractually due sum
that is paid or received in advance for
goods or services.
•The balance included in the invoice will
only follow the delivery.
•It is called a prepaid expense in accrual
accounting for the entity issuing the
advance
-DEFINITION-

3. Advancepayment
Are the safest method of payment for
exporter
Are least attractive option for the buyer
(importer)
exporter
importer

4. Advancepayment
Importer need to pay advance
payment (ex: 50%) of goods price
before exporter sent the goods
When exporter receive the
advance payment, they will sent
the goods to importer
The importer will pay the balance
payment when they receive the
goods

5. Advancepayment -RISK &BENEFIT-
• Are the least secure payment method for
importer
• Foreign buyers may be concerned that the
goods may not be sent if payment is made in
advance.
• An exporter can avoid credit risk because
payment is received before the ownership of
the goods is transferred
• The exporter is relieved of collection
problems and has immediate use of the
money

6. Openaccount The goods, along with all the necessary documents, are shipped
directly to the importer who has agreed to pay the exporter’s
invoice at a specified date, which is usually in 30, 60 or 90 days
The exporter should be absolutely confident that the importer will
accept shipment and pay at the agreed time and that the importing
country is commercially and politically secure.
Open account terms may help win customers in competitive
markets and may be used with one or more of the appropriate
trade finance techniques that mitigate the risk of non-payment.
Open account is typically used between established and trusted
traders.

7. Openaccount Open Account Transaction Flow

8. Openaccount
Risk
o Buyer defaults on payment obligation.
o Delays in availability of foreign exchange
and transferring of funds from buyer’s
country occur.
o Payment is blocked due to political
events in buyer’s country.
SELLER

9. Openaccount
BUYER
oSeller does not ship per the order
(product, quantity, quality, and/or shipping
method).
oSeller does not ship when requested,
either early or late.

10. Consignment • Variation of open account in which payment
is sent to the exporter only after the goods
have been sold by the foreign distributor to
the end customer.
• Transaction is based on a contractual
arrangement in which the foreign distributor
receives, manages, and sells the goods for the
exporter who retains title to the goods until
they are sold.
• Payment to the exporter is required only for
those items sold.
• Appropriate insurance should be in place to
cover consigned goods in transit or in
possession of a foreign distributor as well as
to mitigate the risk of non-payment.

11. Consignment PARTIES INVOLVES:

12. Consignment
Partnership in
Exporting on
Consignment
partner with a
reputable and
trustworthy foreign
distributor or a third-
party logistics provider
(3PL) that is based in
its selected overseas
market
Export Working
Capital Financing
need financing to
ensure that they have
access to working
capital and credit
while waiting for
payment from the
foreign distributor
Government-
Guaranteed Export
Working Capital
Programs
Export-Import Bank
offer programs that
guarantee export
working capital
facilities
Export Credit
Insurance
Export credit insurance
provides protection
against commercial
losses
HOWTO EXPORT ON
CONSIGNMENT

13. Consignment
EXPORTER
will not receive any money
until part or all of the
consigned stock has been
sold
exposed to higher product
returns if the agents or
consignees simply allow
the goods to rot or
become damaged in
warehouses
IMPORTER
Payment to exporter are
not guarantee
RISK