Payment Terms in Export – TT, DP, DA, and Best Practices for Smooth International Payments
Payment terms in export are the agreed conditions between you (the exporter) and your international client about how and when you’ll get paid. These terms cover specifics like payment schedule, currency, method, and required documentation. Setting clear terms is vital: unclear terms can lead to payment delays, unexpected currency losses, compliance headaches with RBI/FEMA, or even disputes over payment. For example, many Indian exporters have faced issues such as:
- Payment delays: waiting endlessly for funds due to vague due dates.
- Currency confusion: losing money on exchange rate differences when payments come in an unagreed currency.
- Compliance issues: missing documentation like FIRA/FIRC or eBRC (Electronic Bank Realisation Certificate) needed for GST refunds and RBI compliance.
- Client disputes: misunderstandings turning into conflicts over when and how payment should happen.
In this guide, we’ll demystify common export payment terms (including TT payment terms, DP payment terms, and DA payment terms), provide real examples, and suggest best practices. Our goal is to help you choose the right payment term that protects your business and ensures you get paid smoothly.
What Are Payment Terms in Export?
Imagine you’re about to start a project for a client overseas. Before work begins or goods are shipped, you both need to agree on some basic questions:
- When is payment due? Upfront, on delivery, net 30 days, or some milestone schedule?
- In what currency? USD, EUR, INR, etc., since currency choice affects conversion rates.
- What happens if payment is late? Any late fees or interest?
- Who covers transfer fees? Will the client cover bank charges so you get the full amount?
- Are any documents required? For example, a signed contract, a GST invoice, or compliance documents like a Foreign Inward Remittance Advice (FIRA) for Indian regulations.
The answers to these form your payment terms. In essence, export payment terms define how and when payment will be made for an international sale or contract. Key elements usually include:
- Payment Method: Will you be paid via bank transfer, PayPal/Wise, letter of credit, etc.?
- Payment Timeline: The due date or schedule (e.g. 50% advance, balance on delivery, or net 15 days after invoice).
- Currency: The currency of payment (to avoid confusion and exchange rate surprises).
- Advance Percentage: If any portion is paid upfront (common 20-50% to secure commitment).
- Late Payment Penalties: Terms like “1.5% monthly interest on overdue amounts” to deter delays.
- Required Documentation: Any paperwork needed to process or prove payment (GST invoice, shipping documents, Softex forms for software exports, eBRC for goods exports, etc.).
Nailing down these details at the start prevents headaches later. Clear payment terms mean you won’t find yourself chasing unpaid invoices, losing money to forex differences, or scrambling to produce compliance documents that weren’t planned. In short, well-defined terms protect your international business and set the right expectations for both you and your buyer.
Common Export Payment Terms (Glossary & Comparison)
When working with international clients, there are several payment arrangements to consider. Each offers a different balance of risk between you (the exporter) and the buyer (the importer). Below is a quick glossary table of common export payment terms and what they mean:
| Term | Meaning (Who Takes Risk) |
| Advance Payment(Cash in Advance) | Buyer pays upfront (full or partial) before goods/services are delivered. Safest for exporter, but clients may resist due to their higher risk. |
| Letter of Credit (L/C) | A bank guarantee on behalf of the buyer that payment will be made if you meet specified conditions. Secure for both, but involves bank fees and paperwork |
| Documents Against Payment (D/P)(Cash Against Documents) | The buyer must pay in full to receive shipping documents. Essentially, payment is due “at sight” (immediately upon presentation) Moderate risk: exporter ships but retains document control until payment. |
| Documents Against Acceptance (D/A) | The buyer receives documents by accepting a bill of exchange, promising to pay later (e.g. 30–90 days). Riskier for exporter: buyer gets goods on credit, paying after a set term. |
| Open Account | Goods or services are delivered before payment, with an invoice for later payment (e.g. Net 30 days). Very risky for exporter, as buyer pays after receipt. Often used only with trusted buyers. |
| Milestone Payments | Project broken into phases, with part-payment at each milestone (e.g. 25% upfront, 50% mid-project, 25% on completion). Balances risk: provides ongoing cash flow and commitment throughout a long project. |
| Telegraphic Transfer (TT) | The method of electronic bank transfer of funds internationally (typically via SWIFT). Often used to settle the above terms – TT itself refers to how money is sent, not when it’s sent |
Snippet definitions: In brief, Advance Payment means you get paid first; L/C means a bank guarantees your payment; D/P means you hold goods until you’re paid; D/A means you extend credit to the buyer; Open Account means you ship and pray (payment comes later); TT means a direct bank wire transfer.
Below, we expand on each of these terms with more details, pros and cons, and when to use them.
Advance Payment (Upfront Payment)
Advance Payment (aka Cash in Advance) means the buyer pays you before you deliver the product or service. This could be the full amount or a significant percentage upfront. It is the safest option for exporters – you have the money in hand before incurring major costs or handing over goods. Even a partial advance (commonly 20-50%) greatly reduces your risk and improves your cash flow.
However, from the buyer’s perspective, advance payment is the riskiest for them (they pay without guarantee of product quality or delivery). Many new clients will hesitate to agree to full upfront payment. Advance payments are more common when: you have a new unproven relationship, you’re making custom products, or the buyer is in a high-risk country for defaults. If 100% advance isn’t feasible, negotiate at least a 30-50% deposit to ensure the buyer has “skin in the game” and you have working capital to start. The remaining balance can be due on shipment or delivery.
Best for: High-risk or first-time transactions, small orders, or whenever you as exporter need maximum security. Just be aware that insisting on full advance can sometimes cost you the deal if the buyer isn’t comfortable with the risk on their side.
Letter of Credit (L/C)
A Letter of Credit (L/C) is a popular compromise to protect both parties. In an L/C, the buyer’s bank provides a guarantee of payment – essentially saying “if you ship the goods and present the required documents, we (the bank) promise to pay you, even if the buyer doesn’t.” It’s a secure mechanism widely used in global trade.
Here’s how it works: you and the buyer agree on terms and the buyer applies for an L/C at their bank. The L/C specifies conditions (e.g. you must provide a bill of lading, insurance certificate, etc.). Once you fulfill those conditions and ship the goods, your bank and the buyer’s bank handle the exchange of documents and payment. You get paid by the bank as long as you did everything as agreed.
Pros: High payment security (bank’s credit replaces buyer’s credit), good for large transactions or new buyers. Cons: Can be costly (bank fees) and paperwork-heavy. It may require knowledge of L/C procedures or even help from trade finance experts to avoid discrepancies in documents.
Typical use: Large export orders (e.g. tens or hundreds of thousands of dollars) or situations where trust is not yet established but the deal is significant. In such cases, the cost and effort of an L/C is justified by the peace of mind it brings.
Documents Against Payment (D/P)
Documents Against Payment (D/P) – also called Cash Against Documents (CAD) – is a payment term where the buyer must pay the invoice amount at sight (immediately) to obtain the shipping documents. In practice, after you ship the goods, you send the crucial documents (bill of lading, invoices, etc.) to the buyer’s bank. The bank will only hand over these documents to the buyer once the buyer has made the payment. No payment = no documents; and without the documents, the buyer can’t clear the goods from customs.
This method provides a decent security balance: you retain control of the goods (through the documents) until you’re paid, protecting you from outright non-payment. The buyer, on the other hand, knows that as soon as they pay, they will get the documents to receive the goods – so it’s fair in that sense. D/P is commonly used for medium-sized transactions or when you have some level of trust with the buyer but still want assurance.
Do note, D/P doesn’t guarantee the buyer will pay – if they default or refuse, you might have to arrange to take back or re-route the shipment (or find another buyer). You also rely on the banking channel to handle the document exchange properly. But it’s simpler and cheaper than an L/C while still giving you protection that an open account wouldn’t. Essentially, under D/P you get paid when the goods/documents arrive, before the buyer actually takes possession.
Documents Against Acceptance (D/A)
Documents Against Acceptance (D/A) is similar to D/P but with an extra credit period for the buyer. Under D/A terms, the buyer doesn’t have to pay immediately upon receiving the shipping documents. Instead, they must accept a time draft (bill of exchange) that legally commits them to pay by a future date (e.g. 30, 60, or 90 days after sight). The buyer’s bank will release the documents to them once they “accept” (sign) this promise to pay, rather than upon actual payment.
In other words, D/A = documents in exchange for a promise to pay later. This gives the buyer breathing room – they might even sell the goods forward and generate cash before the payment comes due. But it introduces significant risk for you, the exporter: you’ve parted with the goods and documents, and now you’re essentially an unsecured creditor to the buyer until they pay on the agreed date. If they fail to pay on time (or at all), you’ve already shipped the goods and have limited recourse except legal action or insurance claims.
Use D/A sparingly. It should be reserved for buyers you trust deeply (long-term partners with a solid payment history). Even then, it’s wise to mitigate risk, for example by export credit insurance (which can cover non-payment up to a percentage) or using factoring to get cash upfront from a financier. D/A can help win business when buyers insist on credit terms, but always weigh the potential cash flow impact and default risk.
Open Account
An Open Account arrangement means you deliver the goods or complete the service without any upfront payment, then send an invoice for the buyer to pay later (often 15, 30, or 60 days after invoice, known as Net 15/30/60 terms). This is very common in established international trade relationships and is highly favorable to the buyer. Essentially, the exporter is financing the transaction until the buyer pays.
For exporters, open account is the riskiest standard method – you could ship products (or deliver work) and then be left waiting and hoping the payment comes on time. If the client delays or defaults, you’ve already provided your end of the deal. Because of this, open account terms are usually offered only to trusted buyers with whom you have an ongoing relationship or who have excellent credit and reputation
Why would exporters agree to this? Sometimes it’s necessary for competitiveness – buyers may simply demand open terms, especially in B2B trades, or large buyers might have leverage to insist on 30-day credit. Also, in certain industries, net payment terms are the norm. Exporters mitigate open account risk by thoroughly vetting buyers, setting short credit periods, charging late fees, and sometimes purchasing trade credit insurance or factoring the receivables.
Bottom line: Use open account only with clients you trust completely, and ideally for smaller amounts that won’t sink you if something goes wrong. Always keep records of what’s owed, and follow up promptly as due dates approach.
Milestone-Based Payments
Milestone-based payments break a project into phases, with payment due after each phase or deliverable. For example, a software development project might have 25% payment upfront, 50% upon completing a prototype, and 25% after final testing. This structure is common for services exports like IT projects, consulting, design, etc., especially when projects span weeks or months.
The beauty of milestone payments is that they spread the risk and reward over the project’s life. As an exporter (service provider), you get continuous cash flow and don’t carry all the risk until the end – if a client disappears or cancels mid-project, at least you’ve been paid for work-to-date. For the client, milestone payments provide assurance: they pay as they see progress and results, not all upfront.
Use case: Large or long-term projects where work can be segmented. It keeps both parties committed: you’re motivated to hit milestones to get paid, and the client sees progress for their money. Just be sure to define milestones and acceptance criteria very clearly (e.g. “Milestone 2 = delivery of beta version with X features, payment due within 5 days of delivery”).
Many freelancers and agencies prefer this model for big projects. It’s a win-win if managed well, but it does require more communication and agreement on what constitutes completion of each phase.
Retainer + Variable Payment
A Retainer + Variable model combines a fixed recurring payment with additional charges for extra work. Think of it as a baseline subscription for your service plus overage fees. For example, a marketing agency might charge a client ₹100,000 per month as a retainer to cover up to a certain amount of work (or simply to be available), and then bill an hourly rate or per-project fee for anything beyond that scope in the month.
This model works great for ongoing service relationships – say, maintenance contracts, continuous consulting, or support services. The retainer gives you predictable monthly revenue (and ensures the client has your committed time or priority service). The variable part keeps things fair if workload increases: you’re not doing unlimited work for a fixed fee.
For exporters of services, especially in fields like marketing, IT support, legal services, etc., retainers can ensure stability. When using this model, clarity is key: define exactly what the retainer covers (e.g. “up to 20 hours of work or 1 major project per month”) and how any extra work will be measured and billed (hourly rate, per deliverable, etc.). This prevents disagreements later.
From a payment terms perspective, retainers are usually paid monthly or quarterly in advance (e.g. pay for the month at the start), and variable fees could be invoiced in arrears or added to the next invoice. Always outline payment timelines for the retainer and the additional fees.
Telegraphic Transfer (TT) Payments
Telegraphic Transfer (TT) refers to the means of payment rather than when you get paid. It’s essentially an electronic international bank transfer – often used interchangeably with “wire transfer”. In the context of export deals, when someone says “TT payment terms” they usually mean that the payment will be remitted via a bank transfer (SWIFT being the network typically used for cross-border payments).
Almost all of the payment terms above (advance, D/P, D/A, open account, etc.) ultimately get settled by a TT transfer between the buyer’s bank and your bank account. The key point is: TT is about how money is sent, not when it’s sent. So you might have an agreement like “30% advance by TT, balance on shipment by TT” – TT is just specifying the method (direct bank-to-bank transfer).
For exporters, TT is the standard payment channel unless you’re using an online platform or specific instruments like L/C. To ensure a smooth TT payment, provide clear bank details to your client, including: Beneficiary Name, Account Number (or IBAN), Bank Name, Bank Address, and SWIFT/BIC Code. Also decide who will bear the bank charges – international wires often incur fees of $20-$50 or more through intermediary banks. You can state “Payment must be made without deductions – all transfer fees to be borne by sender” so you receive the full invoice amount.
(Fun fact: The term “Telegraphic Transfer” is a holdover from when payments were sent via telegraph/telex messages. Today it’s all electronic, but the term and “TT” abbreviation stuck around.)
Best Payment Terms for Exporters (Goods & Services)
Not all payment terms are equally suitable for every situation. The optimal term depends on what you’re exporting (physical goods vs. services), your relationship with the buyer, and deal specifics like order size. Below we break down recommendations for two broad groups – goods exporters and service exporters/freelancers – and highlight best practices for each.
For Goods Exporters
(Think manufacturers, Indian MSMEs selling products abroad, Amazon Global sellers, etc.)
Recommended Payment Terms: For exporting physical goods, protecting against non-payment is crucial since you’re shipping valuable products overseas. Consider these terms:
- Advance Payment (Full or 30-50% upfront): Aim for as much upfront as the market/buyer will tolerate. A 100% advance is ideal in terms of security (zero default risk on payment) – it’s by far the safest mode for an exporter. Realistically, many buyers won’t agree to full upfront, but even a partial advance (30-50%) helps cover your production costs. It also acts as a gauge of the buyer’s seriousness. If a buyer is unwilling to put any money down, that’s a red flag in itself. Common practice is 30% advance, 70% before shipment (or against shipping documents).
- Letter of Credit (L/C): Use L/Cs for large orders or new international customers where trust is still developing. An L/C adds a bank’s promise to pay as long as you meet the conditions (like shipping goods and providing the required documents). This greatly reduces the risk of non-payment without making the buyer pay upfront. For high-value shipments (e.g. above $50,000), the cost of an L/C is often worth it. Just be prepared to handle the paperwork meticulously – small errors in documents can delay payment under an L/C.
- Documents Against Payment (D/P): This is a solid middle-ground for goods. You ship the goods, but retain control via documents until payment. It’s good for medium-sized orders or somewhat known buyers. With D/P, the buyer knows you’ve shipped (you provide proof), but you’re not releasing the title documents until you see the money. It’s less secure than an L/C (no bank guarantee of payment), but also cheaper and less complex. It works best when the buyer is inclined to pay, but you just want that extra assurance.
- Documents Against Acceptance (D/A): Use this very cautiously. D/A is essentially offering credit to the buyer. They get the goods now and pay later by a set date. This can help you win business with buyers who demand credit terms, but you carry all the risk until payment comes in. Only agree to D/A for trusted, long-term buyers who have proven reliable. Even then, consider credit insurance if available, or keep the credit period short. D/A can also be combined with an L/C in some cases (e.g. an usance L/C) to add some security.
Best Practices for Goods Exports:
- Define the currency upfront: Clearly state the payment currency in your contract or invoice (USD, EUR, etc.). This avoids later confusion if exchange rates move. Both parties should know “the price is X in USD” (for example) to prevent any argument if, say, the rupee value changes by the time of payment.
- Set a clear payment timeline: Don’t leave timing open-ended. For instance: “50% advance with order, balance 50% due within 5 days of receiving copy of Bill of Lading.” Or “Payment due within 15 days of invoice date.” Specific timelines set expectations and give you a basis to chase payment if overdue.
- Clarify who pays bank charges: International transfers can go through intermediary banks that deduct fees. Decide in advance: will the buyer “send full amount, all fees on their side” or will you split fees? If not specified, you might receive short payment because $50 got eaten in transit fees. A term like “Buyer to bear all bank transfer charges” on the invoice can save this surprise.
- Document everything: For goods exports from India, ensure you get an eBRC (Electronic Bank Realisation Certificate) from your bank once payment is received. An eBRC is the official digital proof of foreign payment that you’ll need for compliance and incentives. Banks upload this to the DGFT system. Also, keep copies of FIRC/FIRA (Foreign Inward Remittance Advice, proof of remittance to your account) for each payment. These help in GST filings and in proving that export proceeds were realised as per RBI rules.
- Use insurance/guarantees for protection: Consider trade credit insurance, especially if offering D/A or open account to a buyer. Also, if applicable, use government schemes or bank products that secure payments (like ECGC in India, which insures exporters). If a buyer defaults, such measures can compensate a significant portion of the loss.
For Service Exporters and Freelancers
(Think software developers, marketing agencies, designers, SaaS providers, consultants – anyone providing services to international clients.)
Recommended Payment Terms: Service exports often have different dynamics since there’s no physical shipment, but you still need to protect your revenue. Consider these approaches:
- Milestone-Based Payments: Ideal for large or long-running projects. Split the project into phases with payments tied to each milestone. For example, 30% upfront, 40% after Phase 1, 30% on final completion. This ensures you aren’t left unpaid for months of work. It also keeps the client engaged and reassured – they pay as they see progress.
- Monthly Retainer + Hourly/Scope-Based Fees: If you have an ongoing relationship, a retainer model works well. Say you charge a fixed ₹X per month to be available for a baseline service (or up to N hours of work), then charge additionally for any work beyond that. For instance, a web maintenance contract could be ₹50,000 per month retainer, plus hourly billing for major new features. This gives you a stable income and the client guaranteed support, while covering any extra effort fairly.
- 50% Advance / 50% on Completion: For smaller, short-term projects (few weeks of work), a simple 50/50 split is common. Many freelancers use 50% upfront and 50% on delivery as a straightforward, low-risk term. The upfront ensures the client is committed and you’re covered if they vanish; the final 50% ensures you will deliver as agreed, and the client will get to review the work. Just make sure to define what “completion” means (e.g. final files delivered and accepted by the client) to avoid disputes on when that last payment is due.
- Net 7 or Net 15 Payment Terms: These mean payment is due within 7 days or 15 days from the invoice date, respectively. Short credit terms can be offered to trusted, repeat clients who consistently pay on time. It gives them a bit of flexibility (they don’t have to pay immediately on receipt), while not delaying your cash flow too much. If you extend Net 15 terms, always include a late fee clause (e.g. “1.5% interest per month on overdue amounts”) to encourage timely payment and compensate you for any delay. Be cautious, though: do not offer Net 15/30 to brand-new clients – stick to advances or milestones until they’ve proven their reliability.
Best Practices for Services:
- Invoice in the client’s currency: If your client is in the US, quote and invoice in USD; if in Europe, maybe EUR. This removes a barrier for the client (they don’t have to worry about converting currency) and prevents confusion. You can always convert to INR when you receive it, or even hold foreign currency if you have that facility. The key is making it easy for the client to pay. (In India, you can hold foreign currency in an EEFC account or receive in INR; just ensure you meet any repatriation rules.)
- Ensure compliance documents (FIRA/Softex): As an Indian freelancer or agency, make sure the payment method you use provides the documents you need for compliance. For instance, you’ll want a Foreign Inward Remittance Advice (FIRA) from the bank for each payment to claim GST exemptions on export services and satisfy RBI that foreign exchange came in. If you’re in IT services, you might need to file Softex forms for software exports above a certain value. New-age payment platforms and services often auto-generate these compliance docs for you (e.g. an RBI-approved online payment provider might give you a FIRA or e-FIRC for each transfer, simplifying your life during tax season).
- Agree on the payment mode upfront: Will the client pay by bank wire, credit card, PayPal, Wise, or through a platform? Each has different fees and processes. Include the chosen payment mode in your agreement or invoice. For example: “Payment Mode: International wire transfer to the account below” or “Payment via Wise link (we will provide a payment link).” This way the client doesn’t, say, send a PayPal payment unannounced (which might incur fees or be against your preference) when you were expecting a wire transfer. It also means you can guide them to the method that gives you the best outcome (cost and compliance-wise).
- Specify timelines and what happens if not met: Just like with goods, set exact due dates or conditions for each payment. Instead of “payment upon completion,” say “payment due within 5 days of final deliverables being sent.” Also state the consequences if not met: e.g. “Work will pause until payment is received” or late fees apply after X days. Having these terms in writing (email or contract) makes it clear that timely payment is part of the deal.
- Beware scope creep and changes: Projects can evolve, and clients may request extra work. Tie any scope changes to payment as well. For example, include a clause: “Any additional features or revisions beyond the agreed scope will be estimated and billed separately, and may affect the timeline and payment schedule.” This ensures you get paid for extra work and can renegotiate terms if the project grows.
Additional Considerations for Both Goods and Services
No matter what you’re exporting, some advice applies universally to ensure smooth payments:
- Manage Currency Risk: In long projects or deals, currency exchange rates might swing between the time you quote a price and the time you get paid. If you’re worried about this (say a project spans 3-6 months), consider adding a clause to address large forex movements. For example: “If the INR-USD exchange rate moves by more than 5% from the rate on the contract date, the parties will adjust the payment amount accordingly.” This can protect both sides from extreme volatility. Alternatively, you could lock in a forward rate or ask the client to pay in your local currency to shift the risk to them.
- Know your documentation requirements: Different payment methods come with different paperwork. For instance, a letter of credit will specify documents like a commercial invoice, a packing list, a certificate of origin, etc., which you must present to get paid. A bank wire transfer above a threshold might require you to provide a purpose code in India and your bank will issue a FIRA. If you use online payment gateways, check if they provide the necessary documents (some platforms may not give an FIRC/FIRA, which could be a problem for Indian exporters). Being prepared with the right documents (invoice, shipping bill, eBRC, etc.) ensures you stay compliant with tax and export regulations.
- Plan for worst-case (delayed payment) scenarios: We always hope clients pay on time, but wise exporters plan for what to do if a client doesn’t pay. Include a clause in contracts for late payments or defaults. For example: “If payment is delayed more than 15 days beyond due date, work will cease until payment is received. If the delay exceeds 30 days, a late fee of X% will apply. If payment is not received within 60 days, the contract may be terminated and legal action pursued.”skydo.com. It might sound tough, but having this agreed upfront can save you if things go south. It gives you legal leverage and clearly signals to the client that non-payment isn’t an option to take lightly.
- Build trust but verify: Especially with new clients, it’s okay to be a bit cautious. Do some basic due diligence: verify the company’s existence, check references or credit if possible, start with a smaller order or project before larger ones. Trust your gut – if a client pushes back on basic payment safeguards (like even a small advance or signing a simple agreement), consider that a red flag.
- Communicate payment terms early: Discuss and confirm payment terms during the negotiation phase, not after the work is done. Many exporters include key payment terms in their proforma invoice or proposal, so both parties sign off before moving ahead. Having it in writing (even an email thread) is critical. It ensures everyone remembers the deal the same way. Good clients will appreciate the clarity, and troublesome clients will reveal themselves by objecting or being evasive about it (better to know upfront!).
Bottom line: Match your payment terms to the level of trust and risk in each deal. For a brand new or high-risk client, lean towards secure terms (large advance, D/P or L/C, short payment cycles). For a long-term client with a solid track record, you can afford to offer more flexible terms like Net 15 or small credit periods as a courtesy. The key is to protect your interests while also considering what makes the client comfortable – it’s a balance that, when struck right, leads to smooth transactions and lasting business relationships.
Quick decision guide: When choosing a payment term, ask yourself:
- How well do I know this buyer? If they’re new or unproven, play it safe (advance or secure terms). If they’re a trusted repeat client, you can consider open account or lenient terms.
- What’s the order value? High-value deal = don’t risk it; prefer L/C, big advance, or at least D/P. For smaller amounts, you might be flexible.
- How’s the buyer’s country risk? If the buyer is in a country with political/economic instability or known payment issues, use safest terms (or get insurance). Stable markets with rule of law give more confidence for open terms.
- What’s standard in my industry? Some industries just operate on certain terms (e.g. 30-day invoices). Knowing the norm can guide you, but you can still negotiate modifications (like partial upfront) for your safety.
- Do I need steady cash flow? If yes, don’t agree to long credit periods. Break up payments or insist on shorter terms so your cash isn’t tied up too long.
By weighing these factors, you can choose a term that minimises risk and keeps the deal attractive to your buyer.
How to Write Export Payment Terms (Email + Invoice Examples)
Crafting clear payment terms in writing – whether in an email, a contract, or on an invoice – is crucial. It ensures the client knows exactly how to pay you and when, leaving little room for misunderstandings. This section covers the essential elements to include, sample email templates for communicating terms, and how to reflect terms on invoices.
Essential Elements to Include
No matter the format, any written statement of your payment terms should cover these five points:
- Payment Currency: Specify the currency you expect payment in. For example, “All payments to be made in USD.” This prevents a scenario where a client sends you their local currency by mistake. In exports, one party might assume currency, so spell it out to avoid conversion headaches later.
- Payment Timeline: Be explicit about when payment is due. Instead of vague terms like “payment ASAP” or “upon completion,” use clear terms and/or dates. e.g. “50% advance before work begins, and 50% within 7 days of final delivery,” or “Net 15 days from invoice date.” If there’s a specific calendar date, include it. A firm deadline sets the expectation and can be enforced.
- Payment Mode: Indicate how the client should pay. Options include: wire transfer to your bank (provide details), online transfer via a service like Wise, PayPal to a specific email, etc. Stating one agreed method in writing prevents the client from trying a different method that could be problematic or more costly. For example, if you say “via international bank transfer,” they won’t assume they can mail you a cheque or pay by credit card.
- Responsibility for Fees: Clarify who bears any transfer fees, currency conversion fees, or intermediary bank charges. For example, “Buyer is responsible for all bank transfer fees; please ensure the full invoice amount is remitted.” This is often overlooked, and then the amount you receive is short by $30-$50 due to fees. You can alternatively build fees into your price, but one way or another, make sure it’s clear so you’re not underpaid unknowingly.
- Tax/Compliance Notes: Mention any documents or compliance points post-payment. For instance, “We will provide a Foreign Inward Remittance Advice (FIRA) upon receipt of payment,” or “This service is exported under LUT, hence GST is not charged (GST invoice will mention zero-rated export).” Such notes reassure the client that you know your stuff and also inform them of anything they might need to know for their own records. It’s particularly relevant for Indian exporters (e.g. letting an overseas client know you’ll give them a FIRA as proof the money came into India).
By covering all these, you create a comprehensive payment term clause that leaves little room for confusion. Next, let’s see how to communicate these terms in actual emails for common scenarios.
Email Templates for Different Scenarios
Sometimes you’ll need to email a client specifically about payment terms – for example, sending a proposal to a new client, or reminding an existing client of agreed terms when sending an invoice. Here are a few template snippets you can adapt, which incorporate the principles above:
For New Clients (Securing Upfront Payment):
Subject: Proposal & Invoice for [Project] – Payment Terms
Hi [Client Name],
Thank you for choosing to work with me on [Project]. I’m excited to get started!
Before we begin, I’ve attached a Proforma Invoice outlining the project scope and payment terms. To summarize: 50% payment is required upfront to kick off the project, and the remaining 50% will be due within 7 days of final delivery of the completed work.
All payments should be made via international bank transfer in USD. (Bank details are in the invoice.) Please ensure that you cover any bank transfer fees on your end so that the full amount reaches us.
Once I receive the upfront payment, I’ll provide a Foreign Inward Remittance Advice (FIRA) for your reference, which is the official proof of the foreign payment arriving in India.
Let me know if you have any questions regarding these terms. If everything looks good, we can proceed as soon as the advance payment is received.
Regards, [Your Name] [Your Company]
Why this works: It’s polite and professional, yet clearly states the required 50% upfront and the balance timing. It reiterates currency and method, and even mentions providing a FIRA (which might impress the client that you’re on top of compliance). It invites questions but essentially puts the ball in the client’s court to pay before work starts.
For Established Clients (Net Terms Example):
Subject: Invoice [#] for [Project] – Net 15 Payment Terms
Hi [Client Name],
I hope you’re doing well! Please find attached the invoice for [Project/service delivered].
As discussed, the payment terms are Net 15 days from the invoice date. You can send the payment via your preferred method – I’ve included bank transfer details in the invoice, and I also accept Wise if that’s easier.
As usual, I’ll handle any minor incoming fees on my side. Once the payment comes through, I will email you the FIRA document for your records (to confirm the funds were received in India).
Thanks for your continued partnership. Let me know if everything looks in order, and feel free to reach out with any questions.
Regards, [Your Name]
Why this works: With a repeat client, the tone is a bit more relaxed but still clear. It reminds them of the Net 15 term, offers flexibility in mode (since you trust them, you’re not too worried how they pay as long as it comes). It also subtly reminds them you’ll provide the FIRA – hinting “we’ll know when it’s paid”. It thanks them, reinforcing positivity.
For Milestone-Based Projects (Listing Schedule):
Subject: Payment Schedule for [Project Name]
Hi [Client Name],
I’m excited to get started on [Project]. As agreed, here’s the payment schedule tied to our project milestones:
- 30% upfront – to begin the project (due before [Start Date])
- 40% at the halfway point – upon completion of [Milestone Deliverable] (due within 5 days of that deliverable)
- 30% on final completion – upon delivering all final assets (due within 5 days of final delivery)
All payments will be in USD via wire transfer. I’ve attached the initial invoice for the 30% upfront amount, which includes my bank details. (For reference, please cover any intermediary bank fees so that the full amount is received.)
Let me know if you have any questions or if anything needs adjusting. Once the first payment is received, I’ll kick off the project immediately. Looking forward to a successful collaboration!
Regards, [Your Name]
This email lays out each milestone in a clear list, with percentages and conditions. It’s easy for the client to follow and refer back to. Notably, it repeats the requirement that the upfront must be paid to start (creating a professional but firm gate). It also reminds about fees.
Feel free to tweak these templates to fit your tone, but always keep the key details (amounts, due dates, currency, method, fees responsibility) explicit. Written communication is your friend if any dispute arises later.
Invoice Template Examples
Your invoice itself is a key place to reiterate payment terms. A well-crafted invoice can serve as a final checkpoint of clarity. Below are two examples of how you might format the payment information on invoices for different scenarios:
1. Service Invoice with Clear Terms: If you’re exporting services, your invoice might include lines like:
- Payment Terms: 50% upfront, 50% Net 7 days upon completion (due by DD/MM/YYYY)
- Currency: USD (please remit in USD only)
- Payment Method: Bank transfer (Account details below) or Wise
- Bank Charges: Client to cover all transfer fees; amount must be NET of fees
- Late Payment: 1.5% monthly interest will apply to overdue amounts beyond 15 days
And then you’d list your bank details (Beneficiary Name, Account No/IBAN, SWIFT, Bank Name/Address). You might also include a note: “FIRA will be provided after payment for your records.”
This way, the invoice itself acts like a mini contract for payment.
2. Goods Export Invoice (Proforma and Commercial): For goods, often a Proforma Invoice is issued before shipping as a sign of agreement. On a proforma you might write:
- Payment Terms: 30% advance (with PO), 70% against documents (D/P at sight)
- Shipment: Within 4 weeks of advance receipt
- Documents: BL, Packing List, CO, etc. to be sent to buyer’s bank after shipment
- Late Payment/Storage: If payment is delayed, storage charges may apply at port.
On the Commercial Invoice (after shipment), you’d again state: “Payment: 70% due under D/P at sight via [Bank], documents sent on [Date].” This reminds the buyer and any intermediaries of the arrangement.
The key is consistency: the invoice should reflect exactly what was agreed. Never introduce new terms on an invoice that weren’t agreed prior to avoid fights. But definitely use the invoice to emphasise the terms – it’s a document the buyer’s finance team will see, and it serves as your evidence if something goes wrong.
Advanced Clauses for Complex Projects
For larger or more complex deals, especially in services, you might include additional clauses in your contracts to cover edge cases. Here are a few advanced clauses and example wordings:
- Scope Change Clause: “Any changes to the project scope will require written approval (email is sufficient) and may affect the project timeline and payment terms. Additional work beyond the agreed scope will be billed at a rate of $X/hour or at a price mutually agreed for the new scope.” Why: Protects you from scope creep (client adding tasks) without pay. It sets the expectation that extra work isn’t free and will be charged.
- Currency Fluctuation Protection: “For projects extending beyond 60 days, if the exchange rate between [Client Currency] and [Your Currency] fluctuates by more than ±5% from the rate at contract signing, the parties agree to revisit the pricing to accommodate the change. Alternatively, exchange rate can be fixed at the time of invoice for each milestone.” Why: Shields both parties from major currency swings in long projects. (This might or might not be acceptable to the client, but it’s worth considering for very volatile currency situations.)
- Work Suspension & Termination: “If any payment is delayed more than 10 days past due, [Your Company] reserves the right to suspend work until payment is caught up. If payment is over 30 days late, [Your Company] may terminate the contract and all work delivered up to that point will be invoiced and payable immediately. The client will be liable for any completed work and associated costs.” Why: This gives you a clear exit strategy if the client isn’t paying, and creates a strong incentive for them to pay timely. It also means you’re not obligated to keep working if they’re not holding up their end.
You would include such clauses in a formal contract or Terms & Conditions document that both parties sign. For smaller projects, you might incorporate a simplified version in email agreements. Use these as needed depending on risk.
Platform vs. Bank Transfer Considerations
How the client pays you (the channel) can be just as important as when. Different methods have pros/cons, especially for Indian exporters dealing with FEMA rules and fees. Some thoughts:
- Online Payment Platforms (PayPal, Stripe, Payoneer, etc.): These can be convenient but often charge higher fees (3-5% usually). If you opt for a platform, mention it explicitly in your invoice or contract. e.g. “Payment via PayPal is accepted; a 4% platform fee has been added to the invoice amount” or “Client is responsible for PayPal fees.” Also, check if the platform provides necessary documents: Stripe, for example, doesn't provide FIRA. New age platforms like Skydo provide free and instant FIRA along with features like GST-compliant invoicing. If your payment partner doesn't offer FIRA, be prepared to obtain one from your bank afterwards for the inbound transfer. Always weigh the ease for the client versus the cost and compliance for you.
- Traditional Bank Transfers (SWIFT/TT): Bank wires are generally reliable for larger sums. The fees can be fixed (e.g. $30-$40) which is better for big amounts vs a percentage fee platform. Ensure you provide all necessary details as noted before (SWIFT code, etc.). One tip: ask the client to send you the SWIFT transaction reference or a screenshot of the transfer confirmation once they initiate the payment. This helps you trace the payment if it’s delayed. International wires can take a few days (anywhere from 1-5 days typically), so don’t panic if it’s not instant. But having the reference means your bank can chase it after a reasonable time.
- Local Bank Transfers via Fintech (Global Accounts): Solutions like Skydo (and some others) provide local receiving accounts. For example, your US client can pay into a US account, and you get the money in INR without the usual SWIFT friction. These can speed up receipt and often lower costs, because for your client, it’s a domestic transfer. If using such a service, instruct the client accordingly (the platform will usually give you instructions to pass on, like routing number, etc., for a US ACH transfer, which then converts to INR for you).
The overarching principle is to minimize friction for the client but also avoid unnecessary costs for you. Sometimes giving a client multiple options helps – e.g. “You can pay via bank transfer (details below) or I can send a Wise/PayPal request if you prefer card payment – note the latter has ~3% fee.” Always get clarity on fees and documentation with whatever method you choose.
In summary, make it easy for the client to pay you by removing ambiguity. The clearer and more straightforward the process, the quicker you’ll get your money with no drama.
Red Flags to Avoid When Negotiating Payment Terms
Negotiating payment terms can be delicate, but watch out for warning signs in those discussions. If you encounter these red flags while agreeing on terms, proceed with caution (or reconsider the deal):
- Client insists on 100% payment after delivery (for a new relationship): If a brand new client says, “We only pay after the work is done – no upfront,” that’s a big risk for you. They’re asking you to bear all the risk. While it’s not uncommon for large companies to have net payment policies, most reasonable clients will agree to some compromise (like a small advance or milestone) if you ask. An absolute refusal to pay anything upfront, especially from a smaller or unknown client, could indicate cash flow issues on their side or worse, a potential scam. Stand firm that some upfront is standard for new clients – their reaction will tell you a lot about them.
- Vague answers about payment timing: If you hear things like “We’ll sort it out later” or “Our finance team will handle it eventually” without nailing down specifics, be careful. A professional client should be able to agree that “yes, within 15 days of X event, payment will be made” or similar. If they avoid committing to a due date, they might be planning to delay payment or just aren’t organised – either way, risky for you. Always push to define when exactly payment happens (date or condition)
- No written contract or PO: The client says, “We don’t need a formal contract, trust me”. While small jobs with freelancers sometimes run on email agreements, it’s important to have something in writing. If a client avoids writing anything down or won’t send a simple purchase order or email acknowledgement of terms, that’s a red flag. You both need the clarity of a written record. If they won’t do that, they might be planning to dispute things later or are just very inexperienced (in which case, you need to be extra clear and maybe reconsider).
- Ignores discussion of fees or currency issues: You bring up who will pay bank fees or ask which currency, and the client goes, “Don’t worry about it, we’ll figure it out”. If neither of you explicitly decides, you can end up in a spat later (like if $50 is deducted in transit, who eats that?). If the client brushes off these details, it could be that they expect you to absorb costs or they haven’t thought through the process of paying an overseas vendor. Insist on sorting it up front – reputable clients will understand and address it.
- Pressure to start work without payment arrangements in place: For example, you send your contract or invoice, and the client says “We need you to start immediately, we’ll handle the paperwork/payment later.” This is dangerous. If you start work without agreed-upon terms or without the initial payment, you lose leverage. A rushy client might simply be disorganised, but it could also be a tactic. Always at least get the essential terms agreed in writing and any upfront payment received before committing significant work. A phrase to use: “I can’t start until the deposit is in place – hope you understand it’s standard practice.”
If any of these happen, it doesn’t always mean the deal is bad – but it means proceed very carefully. You might tighten the terms (e.g. move from open account to D/P, or require a bigger advance) to protect yourself. In worst cases, be prepared to walk away. It’s better to lose a potential deal than to not get paid after delivering.
Always remember: trust your instincts. If a client’s behaviour during negotiation raises red flags, address them. Good clients will work through your concerns; bad ones will either ghost or keep pushing one-sided demands. That’s your cue to either secure iron-clad terms or politely decline the opportunity.
How Skydo Makes Export Payments Smoother
Setting good payment terms is half the battle. The other half is using the right tools to ensure those terms are executed with minimal friction. This is where a platform like Skydo can be a game-changer for Indian exporters and global SMEs handling international payments. Here’s how Skydo helps you get paid faster and more securely:
- Local Receiving Accounts Globally: Skydo provides you local bank account details in multiple countries. This means your US client can pay into a US bank account, your UK client into a UK account, and so on – no international wire hassle for them. The result? Payments clear faster (often within 1 business day, not the 3-7 days of SWIFT) and with fewer fees for the sender. Your Net 15 can truly mean 15 days, not 15 days plus unknown transfer time. Clients are happier to make a local transfer, so you remove a common excuse for delayed payments.
- No Hidden Forex Markups: Unlike many banks that take a 2-4% cut in the exchange rate, Skydo uses real mid-market rates with a low, transparent fee. If you invoiced $5,000, you’ll know exactly what INR amount you’ll get. No more nasty surprises where your bank credits you ₹3-4% less than expected due to markup. That means more of your hard-earned money stays with you, improving your margins.
- Instant FIRA/eBRC for Compliance: Every time you receive a payment through Skydo, you automatically get a Foreign Inward Remittance Advice (FIRA) immediately. No chasing bank managers for a FIRC – Skydo’s system takes care of it. Come GST or export incentive filing time, you have all the proof of inward remittances ready to go. This is a huge relief for Indian exporters who know the pain of getting these documents from traditional banks.
- Better Cash Flow with Faster Settlements: Skydo is built to move money quickly. Faster payments mean you can reinvest in your business sooner or pay your suppliers on time. It reduces the constant checking “has the money arrived?”. Moreover, by shortening the payment cycle, it indirectly keeps clients on schedule too – when they see paying you is as easy as a domestic transfer (and you get it quickly), they’re more likely to pay on or before the due date. In effect, Skydo helps your clients treat you like a local vendor, simplifying their accounts payable process.
In summary, while you focus on negotiating and setting clear payment terms, consider leveraging a solution like Skydo to execute those terms smoothly. It addresses many pain points – speed, cost, compliance – that traditional banking makes difficult for international business. The combination of great payment terms + a robust payment platform means you can focus on your work without constantly worrying about when or how you’ll get paid. And ultimately, smooth payments = better business for both you and your clients.
Interested in simplifying your international payments? Explore Skydo to see how you can save on fees and get your export earnings hassle-free. With the right terms in place and Skydo handling the heavy lifting, you’ll be well on your way to smoother, faster, and safer global business transactions.
What are the most common payment terms in export?
The most common export payment terms include Advance Payment, Letter of Credit (LC), Documents Against Payment (D/P), Documents Against Acceptance (D/A), Open Account, and Milestone-Based Payments. Each term offers a different balance of risk and flexibility depending on the exporter-client relationship.
What is TT payment in export?
What does DP payment term mean in export?
What does DA payment term mean in export?
How can Indian exporters reduce payment risks?
