Difference between export bill collection and export bill discounting
Some Key Terms
Before we go any further, we need to understand what these two terms mean. A simplified explanation can help us move forward to break it down and learn more about it.
Export Bill Collection: It refers to the process of sending export bills to an overseas buyer through an exporter’s bank to collect payments.
Export Bill Discounting: Export bill discounting is a practice that allows for businesses to receive faster payment for their goods on credit after they shipped to the buyer.
Great! Now, we have the barebones of what these two practices are. And what they have in common: payments to the seller. But let’s see how both of them work to understand these processes better.
For export bill collection, the exporter’s bank sends a set of necessary documents to the overseas buyer to receive their payments. Once the buyer has received the exports, he sends in the money. And the bank then goes ahead and credits the amount to the exporter’s bank account.
In export bill discounting, a business and buyer agree to a contract that allows the buyer to ship their goods on credit. It means the company can issue its financial intermediary to ask for early payment on the goods.
Export bill discounting, thus speeds up the whole process of payments.
The crucial difference between export bill collection and export bill discounting is the time of the payments. While in export bill collection, the seller only receives the money after the buyer receives the goods, in export bill discounting, the seller can request early payments as per the contract.
But these differences also mean that export bill collection is more secure and reliable. It is also an inexpensive method of payment for both the buyer and the seller. The buyer can withhold payment if they’re not happy with the product, and the seller can still own the tile of the goods until they receive payment. It protects both parties and keeps them accountable to each other in a much more straight-forward manner.
Export Bill Discounting, without a doubt, has a much quicker payment process. The seller doesn’t have to wait to get the shipment, wait for them to process it, sell it, and then get paid. It also allows the business to generate more working capital so they can expand and grow more rapidly.
It also simplifies international procedures. With export bill discounting you don’t have to worry about dealing with a different money system or financial culture.
It is also true that export bill discounting incurs fewer expenses as well. Neither practice is inherently better than the other. It is wholly dependent on what is best for your business, in the end.