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Documentary collection

What is documentary collection?

Documentary collection is a system to help exporters.

It is used by exporters to ensure that control of the goods is retained until the buyer has checked he is getting what he expects before committing to pay. Documentary collection is done by involving two trusted banks, who deal with the documents and then the cash. There is a formal set of rules (called URC522, the Uniform Rules for Collections) that is used to govern documentary collections. These rules are published by the ICC here.

Cash against documents or cash against data?

Documentary collection is a "cash against documents" process. If acceptable documents are provided, the buyer can approve payment to the supplier paying "cash" against the "documents". A better process is "cash against data" - which is digital, fast and avoids using banks.

Book a call here to find out more: book a demo.

Documentary collection, a twilight product
Documentary collection: there are better ways

How does documentary collection work?

  • The exporter loads the goods for shipment to the buyer.

  • The exporter lodges his shipping documents with his local bank. These are usually original shipping documents, so these are documents that a buyer would physically need in order to take control of the goods that are shipped.

  • The original documents are then sent from the exporter's bank to the buyer's bank. The buyer's bank then contacts the buyer; he will provide an analysis of the documents received and scan copies, confirm what originals are held, and state the amount that the exporter wants to be paid for the documents.

  • If the buyer wants to receive the documents, he can instruct his bank to make the payment. The buyer's bank then releases the documents.

  • If the buyer does not want the documents, he tells his bank who then returns the documents to the exporter.

So this is a way of using a trusted intermediary to manage the relationship between an exporter and his buyer - ensuring that payment is made against accepted shipping documents.

What can go wrong?

Usually things go wrong if the instructions provided to the buyer's bank are not clear, or if the documents are not sent to the right address.

Since this process is initiated by the exporter, it is vital that instructions are given in the proper form, and the documents are sent to the right place. Often the right place is not a bank branch but a central trade finance department. Sending the documents to the wrong place, or with unclear instructions can result in weeks of delay and additional costs.

So documentary collection should only be used with the support of a specialist who understands the system and can make sure that the documents are routed appropriately.

Why bother with this system?

Documentary collection is expensive and provides no real protection to exporters and importers unless it is a first-time shipment. See above for the danger of misunderstanding the process!

In supply chains that have been running for some time or where there are regular shipments, documentary collection should not be used. There are simpler and better systems - like the platform which runs on scan documents, is completely digital, connects importers and exporters in real-time, and is a fraction of the cost:

  • Ship on Monday

  • Upload and digitise documents on Tuesday

  • Invoice is automatically approved through our 3-way match Tuesday pm

  • Get paid on Wednesday

In our experience, if there is a small amount of trust between exporter and importer, this is a much easier ways to organise documents and payments.

How can I find out more?

Join the website and access the detailed resources page which covers frequently asked questions and how to access our platform.

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