Separate the payment method from the payment milestone

A payment method describes how funds and documents move; a milestone describes when part of your order value becomes due. They should be decided together, but they are not the same decision. The U.S. International Trade Administration describes a spectrum including cash in advance, letters of credit, documentary collections, open account and consignment, with different risk and cash-flow effects for buyer and seller. It does not prescribe one method for every transaction.

Before signing, ask your bank or a qualified trade adviser which methods are available for the actual countries, currency, transaction value and relationship. Then write the commercial schedule separately: amount or percentage, currency, beneficiary, due trigger and documents expected at each stage. This article is Yifeng's procurement workflow, not banking, legal or tax advice.

Define a trigger that can be checked

Labels such as “deposit,” “production complete” or “balance before shipment” are too broad on their own. Convert each into a checkable event. A sample milestone can identify the approved sample or drawing revision. A production milestone can state quantities completed, inspected, accepted and held for correction. A pre-shipment milestone can list the approved inspection findings, packing details and unresolved exceptions.

For each stage, record who prepares the evidence, who checks it and what happens if the evidence is late or inconsistent. A photograph may support progress, but it does not prove that every unit meets the specification. An inspection report may cover only the sample, batch and checks stated in that report. Keep approval of the payment separate from approval of a specification change or acceptance of a defect.

Verify the beneficiary before every transfer

Match the beneficiary name and account details against the signed agreement, purchase order and invoice. If the contracting party, manufacturer, exporter and payment recipient are different entities, request the commercial reason and approval path in writing before payment. The purpose is not to assume that every difference is improper; it is to prevent an unexplained difference from becoming a rushed decision.

Treat any bank-account change as a new verification event. Confirm it through contact details obtained independently from the message requesting the change, record who confirmed it and retain the approved instruction. Do not place passwords, one-time codes or unnecessary personal data in the project file. If the identity or authority cannot be reconciled, stop the transfer and obtain professional advice.

Know what bank documents do—and do not—establish

The International Trade Administration explains that under a letter of credit the bank checks the presented documents against the letter-of-credit terms. Its guidance also warns that document requirements can be detailed and prone to discrepancies. Buyers and sellers should review draft terms with their banks before issuance and make sure the required documents can actually be produced on time.

Because that process is document-based, documentary compliance should not be treated as proof that the physical goods meet every quality requirement; this is an operational inference from the process described by the authority. Similarly, the ITA notes that banks facilitate documentary collections but provide no verification process and limited recourse in a non-payment event. Keep product inspection, acceptance criteria and corrective-action decisions in the procurement plan rather than assuming a payment instrument replaces them.

Close each payment with one approval record

Use one payment-approval line containing the order number, milestone, amount, currency, beneficiary, evidence references, open exceptions, approver and transfer reference. Reconcile the cumulative amount paid with the contract before authorising the next stage. If an approved change affects price or schedule, connect the revised amount to the signed change record rather than editing the original milestone without an audit trail.

End the review with three clear outcomes: approved to pay, held pending specified evidence, or escalated for a commercial or professional decision. Buyers in Taiwan, Indonesia and each African country should separately confirm applicable banking, foreign-exchange, tax and import requirements with their own institutions. A documented decision reduces ambiguity, but it does not guarantee supplier performance, recovery of funds or product compliance.

Your next-order checklist

  • Write the amount, currency, beneficiary, due trigger and required evidence for every milestone.
  • Separate completed, inspected, accepted and packed quantities before approving a production or final payment.
  • Match beneficiary details with the agreement, purchase order and invoice; explain entity differences in writing.
  • Independently confirm every bank-account change before transferring funds.
  • Do not treat documentary compliance as a substitute for product inspection and acceptance criteria.
  • Record the approval, open exceptions and transfer reference, then reconcile cumulative payments.

Sources & reference dates

  1. International Trade Administration — Methods of Payment
  2. International Trade Administration — Letter of Credit

Prepared by the Yifeng Sourcing editorial team with AI assistance from the primary sources listed below. Source dates are recorded; destination-specific requirements should be reconfirmed before acting. This is not legal or tax advice.