Documentary collection, documents against acceptance (D/A)
Under documents against acceptance (D/A), the importer gets the shipping documents by signing a draft that promises payment on a set later date. The exporter gives time to pay and holds a signed promise, while the banks move the papers and take no risk on the buyer.
Documentary collection, documents against payment (D/P)
In a D/P documentary collection, the banks hold the shipping documents until the importer pays at sight. The exporter keeps control of the goods by sea, but no bank promises to pay.
A documentary collection lets banks hold the documents until the buyer pays or accepts, with no bank promising to pay
In a documentary collection the seller's bank sends documents to the buyer's bank, which releases them against payment (D/P) or acceptance of a draft (D/A). No bank promises to pay.
Four payment terms decide who waits for cash, and each step toward open account moves the risk to the seller
Under cash in advance the buyer pays before shipment. Under a letter of credit a bank commits to pay; under a documentary collection banks handle the documents but take no risk; under open account the seller ships first and is paid, typically, in 30, 60 or 90 days.
Every trade has a buyer and a seller, and banks, insurers and agencies fill the roles between them
Under a letter of credit the importer is the applicant and the exporter the beneficiary. Under a collection the exporter is the principal, working through remitting, collecting and presenting banks. Factors, insurers and export credit agencies fill the roles between.