With trade volumes increasing and global boundaries shrinking, SMEs are poised to grow and realise their growth potential. Due to the cumbersome nature of international trade, SMEs often find themselves in need of a banking partner - for ease, convenience, expertise and security. One such important service available to SMEs is Export Bills for Collection.
Export Bills for Collection is the process through which a banking partner facilitates the movement of documents and payments in a trade transaction. In a typical Export Bill Collection process, four parties are involved - exporter (seller), remitting bank (acting on behalf of the exporter), the buyer (importer) and collecting bank (acting on behalf of the buyer). In some cases, the seller is also known as the drawer, while the buyer is also called the drawee.
The process is fairly simple - the seller and the buyer need to get into a contract agreeing to this payment method. Once the seller makes the shipment, all they have to do is submit the documents to the seller's bank and the instruction to coordinate with the buyer's bank. The documents would include the invoice, shipping documents, packing list etc, however it may vary between banks. The seller's bank will then send these documents to the buyer's bank. On receipt of documents, the buyer would provide an intimation to the seller and ask for payment in return. Once the buyer accepts the documents and makes the payment, the buyer's bank remits the amount to the seller's bank. The sellers' bank then credits the amount to the seller. As is the case in any service, the bank may charge a nominal fee in return for expenses and service rendered.
One of the core benefits of trading through this process is that it is more secure than open account trading. By getting Export Bills Collection done through banks, SMEs can make the process hassle-free for themselves since the bank will be doing most of the coordination. Besides, the transactions are handled only through secure banking channels, and no invoices/documents are released without the seller's permission. In most cases, the process becomes much more streamlined, and due to coordination between financial institutions, the total time taken is also reduced.
To make the process better, Banks are coming up with some new services and improving upon existing ones. Having a Global Trade Account can reduce transaction costs for an SME and provide personalised services and timely advice on how the market is moving and trade transaction processes. An Online Trade Portal could go a long way in making customers' lives easier. By enabling customers to perform transactions and submit most documents online, portals like these save time and effort along with a real-time status update. SMEs can avail the benefits of Finance Solutions (Working Capital, Business Loans and LAP) and other financial instruments like LC, BC, BG, Forex, Remittances and Advisory services in the trade process.
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