Create a Bill of Exchange document format for the export payments process
What is a Bill of Exchange document format used for?
A Bill of Exchange is a document that is used in global trade as a written order binding one party to pay a fixed sum of money to another party on demand or at a confirmed date.
The Bills of Exchange (BoE) format is used in global trade as they area convenient method for collecting payments from businesses Internationally. They are used to finance global trade and can be used to obtain credit when discounted with a financial institution.
Although a Bill of Exchange format is not a contract, the parties involved user it to document the terms of a transaction, including credit terms and interest rates. According to the Bills of Exchange Act 1882, a Bill of Exchange is:
An unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand, or at a fixed or determinable future time, a certain sum in money to, or to the order of, a specified person, or to bearer.
What are the different types of Bills of Exchange used?
There are several types of Bills of Exchange that are used:
- A Bill of Exchange that has been issued by a bank is known as Bank Draft, whereas the issuing bank guarantees payment.
- A Bill of Exchange that has been issued by an individual is known as a Trade Draft.
- If a Bill of Exchange is to be paid immediately or on demand then it’s known as a Sight Draft. A sight draft will allow the exporter to retain title of ownership of the goods until the importer takes delivery or immediately pays the sight draft.
The exporter may allow the funds to be paid at a later date (after the importer has received the goods) to give the importer more time to receive the goods before making the payment.
How a Bill of Exchange Works
When products have been shipped, the exporter ‘draws’ the Bill of Exchange on the importer or the importer’s bank. The exporter will give a set of shipping documentation, including the Bill of Lading to their bank (remitting bank). The remitting bank will then pass them on to the importer’s bank (collecting bank).
The importer’s bank (collecting bank) will then present the Bill of Exchange to the importer requesting them to accept or pay the Bill.
What is ‘Documents Against Acceptance’ and ‘Documents Against Payment’?
If the importer receives the shipping documents on ‘acceptance’ of the Bill, this is called Documents Against Acceptance. If the importer receives the shipping documents after payment has been made, this is called Documents Against Payment.
Once the buyer has accepted or paid the Bill, the collecting bank will release the shipping documents and the original Bill of Lading, which allows the importer to obtain ownership of the cargo. If the collecting bank releases the shipping documents to the buyer without received acceptance or payment from the buyer then the bank will become liable.
How to create and download a Bill of Exchange document
In the past, some shippers have messed around with creating documents in Word or Excel templates. Shippers now use IncoDocs to digitally complete and sign Bill of Exchange documents, then download PDF copies to share with other export documentation for International shipments.
Shippers complete Bills of Exchange in minutes by eliminating data re-entry and clicking to pre-fill contact information into the document. Try it yourself with IncoDocs.
What information is required on a Bill of Exchange document?
It’s important that enough detail is provided on the Bill of Exchange to avoid any issues or misunderstandings between all parties involved in the process.
The details to be included on a Bill of Exchange document:
- Reference Number (usually related to a shipment or Commercial Invoice reference number)
- Amount in Figures, Currency
- Bill of Lading date (if applicable)
- Place and Date of Issue
- At (details confirmed between seller and buyer)
- Pay to the order of (Exporter’s Bank)
- The sum of (amount in words)
- Drawn under (reference numbers)
- Issued by (Bank)
- Signed for and on behalf of Drawee
- The party whom the bill is drawn to, the exporter will draw the bill on the importer (Drawee). The Drawee is the debtor that owes money to the creditor (exporter).
- Signed for and on behalf of Drawer
- The party that has issued the Bill, the exporter (Drawer).
Exporters use IncoDocs to create Commercial Invoices, Packing Lists and other shipping documentation
Exporters use IncoDocs’ cloud shipping document software to create and manage all shipping documentation in 1 place and eliminate manual data re-entry. Users eliminate data re-entry by entering data into 1 master screen then have everything instantly sync to all shipping documents required.
Shipping documents include Commercial Invoices, Packing Lists (for FCL, LCL Air or Consolidated shipments), Verified Gross Mass Declarations (VGM), Shipper’s Letter of Instruction (SLI), Forwarding Instructions (FI), Manufacturer’s Declarations and other shipping documentation.