Bankers Acceptance, Open Account&

Factoring Forfeiting countertrade

Aminuddin Hakim Bin Mohd Taib

Before acceptance the draft is not an obligation of the bank it is merely an order by the drawer to the bank to pay a specified sum of money on a

specific date to a named person or to the bearer of the draft.

Upon acceptance the draft becomes liability of the bank, The company’s bank stamps the Note “Accepted” and charges the company a stamping fee

Bankers Acceptance

Definition – negotiable instrument or time draft drawn on and accepted by a bank.

Bankers Acceptance

Purpose• Orders to a bank by a customer to pay a given sum at a given date.

•Backed by bank. .

•Widely used in international commerce, business transaction, because the creditworthiness is supplied by a bank.

Bankers Acceptance Example

Open Account

Definition• Also known as unsettled account/credit account

•An account with a balance that has not been ascertained, that is kept open in anticipation of future transactions

• An open account has no credit limit and you have to pay back the full amount at the end of each month. Your payment will vary depending on how much of a balance you run up each month.

•Need recommendation to open.

• This is a method of settling payment for trade transactions.

•The supplier ships required goods to the buyer who, after receiving and checking the related shipping documents, credits the supplier's account in their books with the invoice amount.

•The account is then settled periodically, say monthly, by the buyer sending a bank draft, or arranging through their bank an airmail or telegraphic remittance in favour of the exporter.

define as : A financing method in which a business owner sells accounts receivable at a discount to a third-party funding source to raise capital.

assume a factor has agreed to purchase an invoice of RM 1 million from Clothing Manufacturers Inc., representing outstanding receivables from Behemoth Co. The factor may discount the invoice by say 4%, and will advance RM720,000 to Clothing Manufacturers Inc. The balance of RM240,000 will be forwarded by the factor to Clothing Manufacturers Inc. upon receipt of the RM1 million from Behemoth Co. The factor's fees and commissions from this factoring deal amount to RM40,000.

To obtain cash. Made money available for investment in

the firm’s growth. Improved cash flow : Receivables become

current cash in flow and its is beneficial to the exporters to improve financial status and liquidation ability so as to heighten further the funds raising capability.

defined as the purchasing of an exporter’s receivables at a discount price by paying cash. By buying these receivables, the forfeiter frees the exporter from credit and the risk of not receiving the payment from the importer.

In forfaiting, receivables are normally guaranteed by the importer’s bank, allowing the exporter to take the transaction off the balance sheet to enhance its key financial ratios. Forfeiting typically requires a bank guarantee for the foreign buyer.

Counter trade is an import / export relationship between nations or large companies in which good and/or services are exchanged for goods and services instead of money.

There are 3 types of countertrade :I. Barter.II.Counter-purchase.III.Buyback.

Barter.-It is the exchange of goods and services for goods and services without any use of money. For example, Malaysia might swap palm oil for steel from another country, say Germany.

Counter-purchase.- In this, a foreign company, or country, trades with a nation with the promise that in the future they will make purchase of a specific product from the nation. A recent example of this is the on going trade between Congo and China where infrastructure is being traded for a supply of metals.

Buyback.

- A buyback arrangement involves the repayment of the original price through the sale of a related product. For example, Malaysia producer of palm oil sells palm oil in return to buy the products made using the palm oil bought from the explorer.

1. Money.2. Competitive advantage.3. Balance of trade.