Incasso calculations — what is it, types

The work of almost every enterprise is accompanied by settlements with buyers and suppliers. For this, a different form of sending funds can be tried on. One of the most common types of settlements in this case is collection. To make a transfer, you must use the services of one of the banking institutions.

1. What is Incasso in simple words

Incasso (encashment) is one of the forms of calculation that legal entities use when it is necessary to transfer funds to a supplier or manufacturer. During the operation, money is transferred through one or two banks.

During the operation, the client transfers funds for the goods received or the services provided to him. To do this, the account must have the appropriate amount. Further, the money is transferred to another account of the recipient in the same bank or in another. A banking institution is a trustee and concurrently, a recipient who acts on the basis of an order.

There are two reasons for using collection as a form of payment.

In the first case, we are talking about payment penalties, whose payment can be made if there is an order from the payer. But, in this case, the method of translation can be applied with the presence of paper, that is, an accepted document or without it.


The second reason is the use of collection orders, where the type of settlement does not imply the obligatory use of the payer’s order. In fact, such a form of payment as a collection implies the existence of collection orders, as well as demands for payment from the party that will receive the money through the bank serving the recipient.

Often these operations require the conclusion of an agreement between the sender, the recipient, as well as the bank, which in the future will give him the right to carry out collection settlements. The contract can not be concluded only if the state requires payment. First of all, we are talking about any contributions, taxes, customs fees or payment under a writ of execution.


2. Views

There are the following types of collection:

  • Documentary. In this case, the bank must necessarily receive documents that will confirm the fact of delivery. It can be any invoices, transport documentation or waybills.
  • Pure. Here we are talking about the use of exclusively payment papers, checks or bills of exchange. Supporting documentation is not required.

The most demanded is documentary collection. This is because such an operation satisfies the requirements of both parties. Under the contract, the supplier will receive a fee, and the company will receive the accompanying papers it needs. But, in any case, the recipient assumes the risks. To protect yourself, it is recommended to require a guarantee from the bank. In addition, do not forget about checking the solvency of the sender.


3. Who is a participant in the collection operation

In settlements for collection, the parties are:

  • Recipient. He is the initiator of collection settlements. This is the party that will receive the money in their account in the future;
  • Sender. This is the person from whose account the money will be withdrawn. It is this person who, following the results of the operation, should receive the accompanying documents;
  • Remitting bank. The institution where the guarantor is served. It is this bank that processes the payment;
  • Collecting bank. This is any banking institution that is not a remitter. For example, they can be a bank located in the country of the sender. This institution assumes the responsibility for processing the payment and, in the future, must provide accompanying papers.

In some situations, calculations are made using one bank. This is convenient when it comes to settlements within the state. But, if necessary, collection can be applied in the course of international transfers. But, in this case, do not forget about checking partners for solvency and integrity. In the event of even minor problems, the sender of the goods runs the risk of acquiring serious problems, accompanied by financial losses.


4. Collection operation by stages

The collection operation is carried out in several stages:

  1. At the first stage, the principal applies to the remitting bank and prepares a collection order. In this case, we are talking about export collection.
  2. Further, the same bank sends the collection order, as well as the relevant documents to the collecting bank.
  3. The third stage is to familiarize the payer with the documents.
  4. After that, the principal receives the payment or documents, depending on the instructions for receiving the collection order.

Settlements for collection proceed according to the following scheme:


  • An agreement is concluded between the recipient and the sender. It states through which bank the payment will be made, as well as other nuances of calculations;
  • After that, the transport company delivers the goods to the recipient. Immediately after that, the exporter will receive transport documentation from the carrier;
  • Further, the exporter must prepare and present all documents, including a collection order to the bank in which he applied;
  • When the papers are received, the bank will check them. But, in this case, we are talking about checking external signs. In most cases, during the verification process, the bank does not delve into the essence of the operation;
  • If no errors are found, the banking institution will execute the order, that is, transfer the papers to the collecting bank. He, in turn, provides an instruction for a collection operation. The received papers must also be checked by the payer;
  • If there are no problems, the sender pays for the order or accentuates the expenses. To do this, you must use the services of a collecting bank or other financial institution that this bank represents;
  • After the payment is received, the collecting bank will transfer all documents to the payer;
  • If the requirements are accepted, the bank transfers the money to the account of the issuing bank. He must send them to the account of the recoverer and on this the operation will be considered completed.

5. Pros and cons of collection settlements

pros

In order to adequately determine the advantages of collection settlements, it is necessary to consider the situation as carefully as possible. On the exporter side, the benefits will be:

  • The representative company sometimes has a great influence on some foreign importers. This makes it possible to demand payment from the trust, if it is a sale, based on the requirement of an open account;
  • A person who is an exporter may exercise the right to request instant financing. To do this, use a bill of exchange sample. This is possible with a bank advance for collateral using the same promissory note;
  • Collection settlement is more affordable when compared with receiving funds through documentary letters of credit;
  • In the case of a documentary collection, the advantage lies in the ability of the exporter to control the products until the bill of exchange is accepted by the recipients, which is drawn up on it, or until the payment for this paper is made;
  • Another significant advantage is the high reliability of payment. Until the moment payment is made, the buyer will not receive the documents. The same applies to the delivery of documents to the importer.

Speaking about the importer, the following advantages of collection can be distinguished here:

  • Regarding net collection, the importer can expect to receive the product even before the money for it is transferred;
  • When conducting a documentary type operation, before the products are shipped, they can be tested. This should be done by a third, uninterested party. But, for this it is necessary to have special certificates that allow third parties to engage in such testing;
  • In some cases, the importer may obtain credit funds from the exporter, relying on a fast bill.

Minuses

Among the significant and disadvantages for a person acting as an exporter, the following can be distinguished:

  • In the case of a documentary collection, the seller assumes certain risks. This is due to the fact that a foreign client can at any time refuse payment or acceptance at the time of submitting a demand. For the seller, this means that he will have to refuse the goods, put them in a warehouse or send them back, which will be accompanied by significant financial losses. It is also worth considering that sellers do not always have ownership of shipped products that are transported by car, air or train. If we are talking about a transaction where the seller has title to the goods, it is recommended to ask a foreign agent or banking institution to protect this goods;
  • Transportation of papers, as well as carrying out the operation as a whole, is a rather lengthy process. Therefore, the seller often has to wait too long for payment. Such time costs are sometimes associated with the fact that the foreign state delays the documentation until the recipient has unloaded the received products at his warehouse;
  • In the event of any difficulties and delays, the financial costs are borne by the seller.

Speaking about the side acting as the importer, only one drawback can be singled out here. Any legal procedures may be applied against the buyer in case of refusal to accept the document, regardless of the condition of the goods. If there is a refusal to accept paper or payment, such circumstances can be protested, which will further harm the reputation from an economic point of view.

6. In what cases is collection an effective method of payment

Experts advise using collection as a payment method only in the following cases:

  • A trusting and reliable relationship has developed between the recipient and the sender;
  • In such areas as economics and law, a stable situation is observed in the importing and exporting countries;
  • There are no restrictions on imported products;
  • No problems are predicted at the stage of obtaining the necessary permits, certificates and licenses.

Conclusion

Collection is a type of transfer between parties that is carried out through one or more banks. Thanks to this form of payment, the sender has the opportunity to receive accompanying documents, and the recipient will receive money in the account in accordance with the terms of the contract. Despite the reliability of the collection, guarantees are extremely rare. Therefore, this method is not recommended to be considered as a settlement option with a new partner.

Similar articles

We use cookies to give you the best experience on our website. By continuing to use this site, you agree to the use of cookies.
To accept
Cookie policy