Understand what each structure changes
Advance payment protects the supplier but increases buyer exposure. Open account is convenient for the buyer but can leave the supplier financing production and collection. Documentary collection gives banks a document-handling role without the same payment undertaking as a compliant letter of credit. Letters of credit can reduce certain risks, yet wording, discrepancies, bank quality, confirmation, timing, and fees matter. Milestone payments can balance customized projects when deliverables are objectively defined.
Verify before discussing credit
Confirm the legal entity, ownership, address, signatory authority, bank details, commercial history, references, sanctions or restricted-party concerns, and the destination of goods. Independently verify any change of bank account using a known contact channel. Start with a sensible limit or smaller order and increase exposure only after successful performance. Credit insurance, guarantees, factoring, or bank products may help in suitable cases.
Write operational payment clauses
State currency, price, taxes, bank charges, deposit, milestones, due dates, invoice requirements, documents, delivery term and named place, title and risk provisions where legally appropriate, late-payment consequences, dispute route, and what happens if production or shipment is delayed. For documentary terms, use names and data exactly and allow enough time to correct errors. Align the commercial contract, quotation, purchase order, invoice, and shipping documents.
Watch behavior as well as paperwork
Warning signs include pressure to change bank details, unusual third-party payments, refusal to identify the legal buyer, inconsistent addresses, unexplained urgency, requests to misstate value or description, and resistance to ordinary verification. Pause and investigate rather than allowing shipment pressure to override controls. Escalate overdue balances early, keep communications factual, and preserve records.
Questions buyers and suppliers often ask
Which payment term is safest?
No structure removes every risk. Advance payment often favors the supplier; confirmed bank instruments may address certain risks; details and parties must be evaluated professionally.
Should a supplier offer open account to win a buyer?
Only after assessing credit, cash flow, margin, collection options, limits, and strategic value. Winning an order that cannot be financed or collected is not a success.
Who pays bank fees?
The contract and instrument should allocate charges clearly, including issuing, advising, confirming, transfer, amendment, and correspondent fees where relevant.