Letters Of credit, Documentary Collections And exchange Finance

A letter of credit is a economic tool used to comfy charge to a targeted birthday party on production of exact documents that evidence the shipment of products. Letters of credit are generally required with the aid of foreign places providers in an try and mitigate some of the dangers related to buying and selling on open account terms.despite the fact that they can also be used in alternate inside one organization in a few instances. The letter of credit score additionally offers a few element of reassurance to the consumer that they will now not be price for product that has not been shipped or does now not meet the phrases of their order.The letter of credit score is issued via a bank and will generally name the enterprise a good way to be the beneficiary (usually the supplier), specify the documents that are required to be supplied (see underneath), specify the sum to be paid and the expiry date of the letter of credit score (often abbreviated to an LC).delivery DOCUMENTSThe files required via the LC are generally the ones required to proof shipment of the products and the first-class and quantity of the product that has been shipped. Letters of credit are not best applicable to sea transportation, they may be equally be used for air and road transported items.typically the LC may also call for files that evidence the packing of the products, referred to as a packing listing. more than one copies of documents may be required with the aid of the LC. Invoices are also commonly required. The purchaser may additionally call for a few shape of inspection certification. this can be by way of an independent inspectorate together with a government department or it is able to be through the buyers remote places agent. the former may be required for the importation of the product e.g. compliance with protection standards and the latter may be required to provide the client extra warranty that the product is in shape for cause and of merchantable nice.subsequent the LC is probably to name for documentation that evidences the cargo of the product. For sea freight this could be bills of lading. A invoice of lading is a document issued by means of a delivery business enterprise evidencing the receipt of products (commonly in bins) onto a unique deliver for onward transfer to a distinct vacation spot. For air freight, an airway bill is typically required, imparting comparable proof of loading onto a aircraft. in the case of delivery by means of street, files evidencing street transportation could be requested.The letter of credit ought to make request for other files in addition to the above. The LC will verify that on presentation of those documents to a financial institution, the required sum might be paid.notwithstanding the added security of buying and selling by using letter of credit score there are still a few dangers to the provider if finances are not available from the issuing financial institution to clear the LC. therefore, in some cases the seller may additionally ask for the letter of credit to be confirmed through a local bank. In confirming a letter of credit, the neighborhood financial institution undertakes to pay the LC and takes on the economic chance.Letters of credit score can consequently be useful to the buyer and the vendor however the buyer will want to either offer price range to their bank or have a facility a good way to open a letter of credit to their dealer. this could create an difficulty for the buyer. this can be addressed in some of approaches. first of all, if the shoppers credit standing is good they may satisfactory for a revolving facility which can be used to open letters of credit score to their suppliers. If the customers credit records is not so strong they may be capable of use a factoring facility, combined with a exchange finance facility to at ease the transaction. within the case of factoring, the factoring agency will factor the closing debts to the shoppers borrowers and the funds launched from those sales invoices are used to liquidate the liability incurred from the letter of credit score.similar to a letter of credit score is a documentary series. With this shape of payment, a neighborhood bank can be instructed to pay the customer of production of distinct documents in a lot the identical way as a letter of credit. but, the dealers security is reduced as the exact necessities are not set out and agreed in a economic tool as is the case with a letter of credit.Letters of credit, documentary collections, trade finance and factoring are complicated regions, particularly while worried with imports and exports. but, our advisers might be greater than satisfied to assist you by means of locating you organisations that could open letter of credit for you and if essential provide the trade finance and factoring centers to aid the opening of letters of credit score in your suppliers.The value of letter of credit score, change finance centers depends very much upon your requirements and instances.

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The Hidden Costs of Computerizing Credit and Collection Departments

Most credit departments in America today have become computerized. The credit analysts and collection specialists have been replaced by customer service representatives. The receptionist has been replaced by an obnoxious sounding electronic voice. All these changes have come at a cost to you, the consumer.

When applying for credit, the consumer is now to reduced to a set of numbers that are entered into a computer. Based upon a specific formula, the request for credit is either accepted or denied. Each customer service representative in the credit department is issued a generic set of instructions, and granted an equal amount of authority regarding how to handle every request. In the collection department, the customer service representatives are also issued generic instructions about how to handle disputed claims.

In collection departments many times, extension and deferral requests are now handled by computers . Injecting technology into both of these departments results in financial and emotional costs to consumers. How many of us have designated thirty minutes of our lunch hour to contact one of our creditors to resolve a problem, and after navigating the electronic maze, have been told the estimated wait for this call would be fifteen to twenty minutes? We have various responses to this situation. Our first inclination is to hang up and get on with our lunch hour. This response is understandable, especially if we are sure that the creditor we are calling is the one who is at fault. Unfortunately it comes with the risk of damaging our credit rating and/or costing us significant late fees or finance charges. Another response is to wait on hold for fifteen to twenty minutes.

By the time we talk to a customer service representative, our frustration level is high, and we will likely will have to ask for a quick resolution because our time is running out. In most work places today, personal phone calls are not allowed on company phones. We are required to use our cell phones to make these calls. If it is necessary for us to spend sixty minutes a week contacting our creditors to straighten out their errors, we are using 240 anytime minutes of our cell phone plans. These calls account for over half of a 500 minute cell phone plan!!! In many cases we experience the ultimate in frustration when we spend thirty minutes of our lunch hour trying to deal with a problem, and we discover that the customer service representative we are talking to does not have the authority to handle our dispute. We end the conversation knowing that we will have to spend another lunch hour on the phone with that creditor.

Waiting on hold for long periods of time during a work day can cause people to compromise their jobs. Since people can ill afford late fees and finance charges, they feel as if they have no choice but to continue with the phone calls which cut into their work day. If contact with a collection department becomes too difficult, people who start the process in good faith, may convert to become people who do not care anymore. In many instances, being denied quick access to credit and collection departments results in customers incurring damaging information on their credit reports. One of the results of eliminating qualified people in credit departments in exchange for using generic computer driven credit guidelines to grant credit, is higher risk and more costly credit. Chances are that customer service representatives will not be able to solve problems such as a computer increasing an interest rate from 6% to 19.9% on a customer’s bill because the payment is recorded as a day late, even though the payment arrived on time and was misapplied by the creditor’s accounting department.

At best, it will probably take multiple calls to the institution to correct the problem. The number of credit cards issued to people that can ill afford to have them is another outcome of generic credit policies. Once again, the subsequent payment defaults on these cards are passed onto all cardholders. Due to the considerable sums of money generated by late fees, finance charges and increased interest rates instated after late payments, credit card companies can afford to carry substandard credit card holders.

Some of the results of eliminating collection specialists in collection departments are:

1) Generic instructions do not cover all collection problems.

2) Customer service representatives do not have enough authority to enable efficient solutions for some common problems.

3) Customer accounts become referred further into the collection process due to inadequately trained customer service representatives who cannot “think outside the box”.

4) Due to computerization, it is rare to be able to access the same customer service representative twice. Therefore the customer has to give the complete account history each time he or she makes a call in order to bring the new representative up to speed.

5) When customer service is outsourced, the people working in the phone banks have no background on the accounts, and are unfamiliar with the original representations made by the company.

6) When outsourcing occurs outside this country, many times communication is difficult due to the limited English vocabulary of the customer service representatives.
Before technology was introduced into corporate America, the sales, credit and collection departments worked in concert. In the corporate environment of today, too many times the sales, credit, and collection departments live out the cliche that the “right hand does not know what the left hand is doing”. The consumer is the one who pays for this chaos.

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