what is the importance of bill of exchange
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Exporting often involves a unique set of risks that may be unfamiliar to business owners who are used to trading domestically. Separate laws and customs between states, combined with longer and more complex transport routes and methods, can make exporting a lot more difficult than trading within a country.
A bill of exchange helps to counter some of the risks involved with exporting. Long-term trading arrangements between firms in different countries can be badly effected by exchange rate fluctuations, so the fixed payment terms laid out in a bill of exchange provides exporters with the assurance of a fixed price.
It also provides an exporter with protection. By drawing up a bill of exchange with their bank and submitting it to their importer’s bank, an exporter gains a contingent agreement that it will not have to chase its importer for payment if that company fails to honour the agreement and pay its bill.
A bill of exchange helps to counter some of the risks involved with exporting. Long-term trading arrangements between firms in different countries can be badly effected by exchange rate fluctuations, so the fixed payment terms laid out in a bill of exchange provides exporters with the assurance of a fixed price.
It also provides an exporter with protection. By drawing up a bill of exchange with their bank and submitting it to their importer’s bank, an exporter gains a contingent agreement that it will not have to chase its importer for payment if that company fails to honour the agreement and pay its bill.
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