Get to know the vital terms of Logistics and Supply Chain Management.
Cash Against Documents, in simple words, refers to a payment mode whereby the buyer party pays cash to an intermediary, it could either be a bank or an agent for receiving ownership documents of the merchandise being sold. An intermediary hands over the ownership documents only to the buying party upon successful payment from the buying party.
Intermediary Interests: The shipping and ownership documentation are held by a trustworthy middleman, generally a bank until the buyer pays.
Buyer Payment Before Ownership: The buyer pays the amount agreed upon before accessing papers such as the bill of lading, which hands over the owner’s title to the goods.
Seller Security: It is also a secure method because the goods are under the control of the seller, and the documents prove that ownership will be transferred only when the buyer makes his payment.
Cancellation of Risk of Payment: The seller is assured of payment by the time the buyer gets in control of the goods.
Balances Buyer and Seller Needs: It balances the needs of the buyer and seller, whereby the seller will not have lost his ownership until he gets paid, and the buyer will have acquired the documentation needed to take over the goods.
In a nutshell, Cash Against Documents is a secure payment for logistics because an intermediary caters to a buyer before ownership papers are delivered to him.