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Cash against documents

If you are an importer of manufactured products, your suppliers may ask you to pay them on the basis of "cash against documents" or "CAD".


Here we explain how CAD works in practice and how it is used in trade finance.


Read to the end of the post to find out about the modern alternative to cash against documents which is "cash against data" - and how cash against data can be used to generate significant savings for corporate buyers of manufactured products.

Cash against documents system

What is cash against documents?


CAD or cash against documents is contractual term that the buyer and supplier can agree which requires the buyer to pay the supplier before delivery of the goods (but after handover) on the basis that documents are provided conforming to the buyer's expectations.


It can work well for both parties:


  • The buyer provides the supplier with a list of documents it wants to see in order to be satisfied that the supplier has fully performed all of its tasks, including any particular outcomes that the documents need to evidence.

  • The supplier provides the documents.

  • The buyer inspects the documents and pays the supplier if the documents match the specified criteria.

  • If the documents do not match, the buyer might still accept them and pay (paying "cash against documents").


What documents can be involved?


There are typically three main documents that a buyer will request:


  • A transport document like an airway bill, bill of lading or CMR

  • A packing list

  • A commercial invoice


The buyer will usually set out the details of the goods that should be reflected in these documents (eg: descriptions of the goods, quantities, prices, latest shipment dates and so on).


Buyers may also request other documents, such as certificates, inspection reports and so on - in order to confirm that the goods are going to be as specified.


CAD as a basis for payment


Cash against documents can be used as a pre-agreed basis for payment by the buyer as term of the contract with the supplier.


This can provide a supplier with considerable comfort that it can be paid before handing over control of the goods involved to the buyer - receiving cash against documents - and only then releasing the goods to the buyer.


Documentary collection


Suppliers sometimes do not want to provide the buyer with the specified documents directly, since certain documents can carry with them rights to collect the goods - for example, an original bill of lading.


In this situation, the buyer and the supplier might agree a documentary collection. This is also a cash against documents process, but it is handled between the buyer's bank and the supplier's bank.


  • The supplier provides the documents to its bank.

  • The supplier's bank sends the documents with instructions to the buyer's bank.

  • The buyer's bank holds the documents pending a confirmation from the buyer that the documents are acceptable.

    • If the buyer accepts the documents, the buyer's bank pays the supplier's bank.

    • If the buyer does not accept the documents, the buyer's bank holds the documents to order of the supplier -and will return them if requested.


Documentary collection can be time consuming and expensive to operate as there are a number of steps and communication between the parties can take time. A similar process can be organised using "cash against data" which is a real-time and direct data connection between the supplier and the buyer to check the documents - and so it is much quicker and cheaper for all the parties.


See here for a description of a documentary collection service.


CAD as a basis of trade finance - LCs


Cash against documents is also at the heart of documentary credits or letters of credit.


Letters of credit are complicated and there are many variations. But a typical letter of credit to support a transaction in manufactured goods operates as follows:


  • The buyer instructs its bank (the issuing bank) to issue a letter of credit which specifies documents which must be provided and the key details that the documents should state - such as amounts, dates, descriptions of goods etc.

  • The issuing bank issues the letter of credit to the supplier's bank (the negotiating bank) with these details.

  • The supplier hands over the goods and then provides the documents to its bank (the negotiating bank) and the documents are sent to the issuing bank.

  • The issuing bank checks the documents:

    • If they conform to the specification in the letter of credit, it pays the negotiating bank and collects from the buyer, either immediately or later depending on what they agree

    • If they do not confirm to the specification, then the process becomes a documentary collection where the buyer's bank simply liaises with the buyer to get instructions about what to do.


Letters of credit and documentary collections have become less popular because they take time to operate and are expensive. See here for a description of a letter of credit.


Cash against data - an upgrade


Cash against data is similar to cash against documents - but real-time, low-cost and efficient for all parties.


The supplier collects up the documents and then digitizes them. The supplier sends scans of the documents and the data to the buyer warranting their correctness. The buyer makes a decision on approving payment based on what is sent by the supplier.


This is efficient and low cost because the buyer and supplier deal directly with each other and the data can flow almost instantly after shipment. Since the documents are digitized, the data can also be used, under buyer control, to automate the process.


Instead of weeks, the process takes hours. Literally:

  • Ship on Monday

  • Digitise documents on Tuesday with buyer approval on Tuesday (which can be automated)

  • Cash on Wednesday


Cash against data - trade and supply chain finance


As explained above, cash against documents and cash against data are techniques which enable suppliers to get paid upfront and before delivery.


This is good for suppliers and usually saves money for both buyers and suppliers because it is more efficient than the supplier providing credit.


In fact, the quicker the supplier gets paid, usually the lower the costs for all the parties involved.

But buyers, for many good reasons, often want to pay suppliers later - see here about supply chain finance.


This is where the power of cash against data becomes visible.


Cash against data can be used with financiers to enable suppliers to be paid immediately (by the financier) giving the buyer time to pay.


Using cash against data, corporate buyers can confirm very early, efficiently and with high levels of automation that the invoice is approved for early payment to the supplier.

This means that early payments to suppliers are truly early, utilisation of supply chain finance programs is high, and all suppliers can be included because of the high levels of automation which a data-driven approach supports.


Cash against data is a modern version of cash against documents - and it delivers significant wins for corporate buyers by making their supply chains more resilient, reducing the cost of what they buy, and enabling them to manage working capital more efficiently.






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