Timely Payment

Depending on the nature and primary objectives of your business, "timely payment" can mean very different things. You may have different needs, depending on the nature of the transaction.

As an Exporter, most often, the faster one can be paid, the better – from a cash flow and working capital point of view, as well as from a risk mitigation perspective. Effective management of receivables, especially in international business, is critical to the financial health of your business.

Perhaps less obvious is the fact that, the longer a payment is outstanding as a foreign receivable, the higher the possibility that something will happen which may prevent an Exporter from being paid. This is particularly important in high-risk markets, where economic or political volatility, shortages in foreign currency, and many other factors can arise quickly, and interfere with the conduct of business.

Both Importers and Exporters are vulnerable to foreign currency risk as a result of exchange rate fluctuations. Payment timing strategies, together with foreign exchange products and strategies offered by TD Securities, may provide protection against such exposure to help manage foreign exchange risk. Please refer to TD Foreign Exchange Services for additional information.

Most commonly however, payment timing is related to cash flow and working capital management, and TD Global Trade Finance (GTF) can offer payment options and financing techniques to meet business needs of both Exporters and Importers.

Certain Trade Finance products such as Documentary Collections or Letters of Credit (L/Cs) can be issued with terms specifying immediate payment (Payment at Sight), or deferred payment (Term Payment). In the case of L/Cs, Sight Payment usually refers to payment being made upon presentation of compliant export documents at the counters of the Bank effecting payment. Term Payments can be defined in various ways, such as "60 days (After) Sight", "30 Days After Shipping Date".

A financing option available to address "Timely Payment" needs is the discounting of Term Payments in order to pay Exporters immediately for compliant export documents. TD GTF will pay an Exporter (the amount due, less applicable charges), and collect funds from the foreign bank in the timeframe originally agreed to with the trading partner. In this way, the buyer is granted financing, and the Exporter (TD client) receives payment immediately, avoiding any adverse impact to cash flow and working capital.

The options available to address your payment timing requirements and cash flow/working capital management are varied, and involve differing degrees of complexity. Please contact us to discuss the options, and to find out more about how we can help.

    July 24, 2014

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