WHAT IS CASH IN ADVANCE OR ADVANCE PAYMENT?
The Cash in Advance or Advance Payment method entitles advancement of cash from the buyer to the seller. Paying in advance offers the greatest
protection for the exporter and places the risk on the buyer. Payment does not assure the shipment or delivery of the goods from the seller and the buyer will rarely put down cash up front before he reasonably
assures himself that the goods will be shipped and that the type of goods ordered will be delivered.
Although this method of payment is not uncommon, requiring full payment in advance may cause lost sales to
a foreign (or even another domestic) competitor who is able to offer more attractive payment terms. In some cases, however, where the manufacturing process is specialized, lengthy or capital-intensive, it may be
reasonable to insist upon partial payment in advance, or on progress payments. This method is often too expensive and risky for foreign buyers, but useful when shipping to politically unstable counties, when the
buyer's credit is unsatisfactory and when goods are custom made to customer's order.