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Exporting typically involves a number of unique risks that may be unfamiliar to traders or business owners used to trading domestically. A bill of exchange helps offset some of the risks associated with exporting. Long-term commercial contracts between companies in different countries can be severely affected by exchange rate fluctuations, so fixed payment terms in a bill of exchange give exporters the security of a fixed price.
A bill of exchange is a written order, used primarily in foreign trade, requiring one party to pay another party a fixed sum of money at sight or by a specific date. It is used in international transactions as a negotiation tool.
It also offers protection to an exporter. By writing a bill of exchange at his bank and sending it to his importer's bank, an exporter obtains a standby agreement that he does not have to ask his importer to pay if that company defaults to honor the agreement and pay your bill.
The bills of exchange is drawn in a set. It has two copies and both are in the nature of the original.
It is of two types:
(i)Sight Draft
(ii) Usance Draft
1. Sight Draft: When the drawer i.e. exporter expects the drawee i.e. importer to make the payment immediately after presenting the bill of exchange, this is called a Sight Draft. The buyer cannot accept the delivery of goods/documents without payment.
2. Usance Draft: If the exporter has agreed to provide credit to the foreign buyer, he draws a bill of exchange if he is drawn to pay on a date after the submission date. A bill of exchange can be drawn according to the term of payment, namely 30 days sight, 60 days sight after being presented to the drawee (importer), who withdraws the documents accepting the bill of exchange by putting his signature and date.
In Other words, we can say that it is a written instrument containing an instruction signed by the drawer directing a specific person to pay a specific sum of money only on the instruction of a person to the holder of the instrument. It has the form Demand.
The Bill of Exchange can be created manually or using Export compliance software, but creating in software for an Export company has the benefits of accuracy and efficiency as compared to manual creation.
Here are some of the details present in the Bill of Exchange:
- Invoice No
- Consignee Details
- Bank details
- Date
Sky ERP Export plus is the best Export compliance software. Using our software users will experience complete automation in Document creation as after creating a commercial invoice various fields of other documents are filled automatically. This software for Export company is designed keeping in mind the challenges and needs of Exporters.
To know more about SKY ERP EXPORT PLUS and book a free Demo please get in touch at sales@everexinfotech.com or call +91 81 0434 5257 Visit us at https://everexinfotech.com