The 4 Most Trusted Payment Methods for Sourcing


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The 4 Most Trusted Payment Methods for Sourcing is a document to help Alibaba users understand the 4 payment methods available to them including tips and hints on how to make payments safer and why you would use each payment type.

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The 4 Most Trusted Payment Methods for Sourcing

  1. 1. Many of you reading this article will be disappointed to know that there is no foolproof method of payment that can eliminate sourcing risk completely. Simply put, reducing risk for one party means increasing risk for the other. Involving third parties in transactions can help, but even third parties cannot guarantee everything during the sourcing process will happen smoothly. Not to say that risk can’t be reduced. It can, and for both parties as well.© 2010 - The Four Most Trusted Payment Methods For Sourcing - Page
  2. 2. To start, effective communication is crucial for all business deals. When you’re dealing with foreign company representatives that don’t evenspeak your language, this is even more crucial. Unexpected results can occur in even the most mundane aspects of business, simply becausethings are done differently in different parts of the world.To resolve this issue, make sure you ask any and all questions you have regarding their procedures. Always be courteous, ask for detailedanswers, and don’t forget to let suppliers know a little about yourself as well. Suppliers can sometimes provide you with useful suggestions,though that is only possible if conversations are fluid and friendly. If anything unexpected happens, don’t focus on the problem; instead seekout a solution that both parties can agree upon.Secondly, a smart buyer should always perform detailed research on their product, industry and suppliers in order to minimize risk. Askpotential suppliers about product quality, lead times, types of equipment available, sampling policies, previous clients, etc. Note the responsesfor not only the information given, but also their service attitude. Detailed customer service and answers go a long way in showing how well asupplier can tackle issues if or when they occur.Finally, here are four of the most widely accepted methods in the sourcing industry, as well as how you can best put them to use. Telegraphic Transfer (T/T) After Sales CollectionPROS: BEST USED FOR: PROS: BEST USED FOR:Fast, requires little to no Sample orders or small orders. Safest method for buyers. Long term contracts. Supplierspaperwork, widely accepted. Sample orders are precursors of seldom agree to collect payment more business ahead so suppliers after delivery because it putsCONS: are highly unlikely to skip town CONS: them at a huge disadvantage.Once you send it, the money is with your cash and rob Rarely accepted unless for However, suppliers are alwaysgone. themselves of future trusted customers. happy to strike long term deals,RISK TO BUYER: opportunities. RISK TO BUYER: so if you find one you like, tryMedium to High. Low. negotiating collection payment into a contract.© 2010 - The Four Most Trusted Payment Methods For Sourcing - Page 2
  3. 3. Letter of Credit (L/C) Escrow ServicePROS: BEST USED FOR: PROS: BEST USED FOR:Safe for both parties. Agreements of significant value. Safe for both parties. Small or trial orders. Escrow L/Cs are legally binding services are ideal for buyersCONS: agreements CONS: working with a supplier for theContract negotiation can get that guarantee the transfer of a Has a price tag. first time or suppliers whosetricky. buyer’s funds once goods have reliability is in question. When RISK TO BUYER:RISK TO BUYER: been delivered. Most L/Cs include Low. using escrow services, buyers willLow to Medium. additional clauses that must be have to foot a slightly larger bill, met for payment to be made. though most will argue that the While these clauses increase increased security is better than security for buyers, they add losing an entire order due to additional pressure on the unforeseen circumstances. suppliers and may cause prices to go up .About (HKSE: 1688.HK) is the global leader in e-commerce for small businesses and the flagship company of Alibaba Group. Founded in1999, makes it easy for millions of buyers and suppliers around the world to do business online.© 2010 - The Four Most Trusted Payment Methods For Sourcing - Page 3
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