How documentary collection works
- Contract is signed by the buyer/importer and seller/exporter, stipulating that payment is to be made by documentary collection (cash against documents).
- Goods are shipped. Seller (drawer) ships the goods and prepares the documents requested by the buyer.
- Collection order is issued. Seller provides his bank (remitting bank) with the requested documents and the collection order.
- Collection order is forwarded. Remitting bank examines the collection order and documents (number and title of documents only) and forwards them to the buyer's bank with instructions to deliver documents to the buyer only against payment. Seller receives an acknowledgement of receipt.
- Collection advice is issued. Once it has received documents, buyer's bank (presenting bank) notifies his client (drawee) and asks him to make immediate payment.
- Payment is authorized. Buyer accepts to pay against the documents and authorizes bank to forward payment.
- Account is debited and documents delivered. Buyer's bank debits buyer's account for the amount of the collection, plus applicable fees, and delivers the documents to him. Buyer can then clear the goods through customs and take possession of them.
- Payment is forwarded. Buyer's bank forwards the collection amount to the seller's bank.
- Seller receives payment. Once it has received payment, seller's bank credits collection amount to seller's account, less applicable fees.
