Advance payment is a type of down payment or prepayment a good or service is realized. Advance payments are sometimes required to clear the trade and sometimes to cover the seller's costs to supply the product or service.
Advance payment may cover the total amount or part-paying a supplier before the goods are delivered. The general practice in cross-border trade is that the payment is made after the freight service is received. However, making payment at the reservation stage is a common method in practice.
FAQ
What is the risk of advance payment?
The risk of advance payment is that the product or service may not be delivered as promised, and the buyer may lose their money.
What can you get an advance payment for?
An advance payment can be received for goods or services that will be delivered at a later date.
Is an advance payment a deposit?
An advance payment can be considered a deposit if it is made to secure a product or service.
Is an advance payment refundable?
Whether an advance payment is refundable or not depends on the terms of the agreement between the buyer and seller.
What is the difference between advance payment and upfront payment?
Advance payment and upfront payment are similar, but advance payment usually refers to payment made before delivery or completion, while upfront payment refers to payment made at the beginning of a project or service.
What is the disadvantage of advance payment?
The disadvantage of advance payment is that the buyer may lose their money if the product or service is not delivered as promised.
Can a company take payment before shipping?
Yes, a company can take payment before shipping, but it carries the risk of the product not being delivered as promised.
Is it legal to invoice before shipping?
Yes, it is legal to invoice before shipping, as long as the terms of the agreement between the buyer and seller allow for it.
In what circ*mstances exporter will prefer advance payment?
An exporter may prefer advance payment when dealing with a new or untested buyer, or when the product is custom-made or difficult to resell.
How do I record an advance payment to a supplier?
To record an advance payment to a supplier, create a new accounts payable entry and apply the payment to the supplier's account.
