Payments Training Hub
Documents against payment PAYMENT OPERATIONS STARTED LIVE 01 Documents against payment - usually written as D/P ACTIVE 02 Documents against acceptance - usually written as D/A QUEUED 03 Bill of exchange - key instrument in a D/A collection QUEUED 04 Risk difference between D/P and D/A - stark, and exporters must weigh it QUEUED 05 Exporters - practice, many exporters use a mix QUEUED Documents against payment, usually written as D/P, means the collecting bank may release the documents to the importer only after the importer has paid the full amount stated in the Step 1 of 5 Documents against payment STARTED Documents against payment usually written as D/P ACTIVE Documents against acceptance usually written as D/A QUEUED Bill of exchange key instrument in a D/A collection QUEUED Risk difference between D/P and D/A stark, and exporters must weigh it against QUEUED Exporters practice, many exporters use a mix QUEUED Documents against payment, usually written as D/P, means the collecting bank may release the documents to the importer only after the importer has paid the full amount stated in the
Documents against acceptance PAYMENT OPERATIONS IN PROGRESS LIVE 01 Documents against payment - usually written as D/P DONE 02 Documents against acceptance - usually written as D/A ACTIVE 03 Bill of exchange - key instrument in a D/A collection QUEUED 04 Risk difference between D/P and D/A - stark, and exporters must weigh it QUEUED 05 Exporters - practice, many exporters use a mix QUEUED Documents against acceptance, usually written as D/A, means the collecting bank may release the documents when the importer accepts a bill of exchange, also called a draft, promising to pay Step 2 of 5 Documents against acceptance IN PROGRESS Documents against payment usually written as D/P DONE Documents against acceptance usually written as D/A ACTIVE Bill of exchange key instrument in a D/A collection QUEUED Risk difference between D/P and D/A stark, and exporters must weigh it against QUEUED Exporters practice, many exporters use a mix QUEUED Documents against acceptance, usually written as D/A, means the collecting bank may release the documents when the importer accepts a bill of exchange, also called a draft, promising to pay
Bill of exchange PAYMENT OPERATIONS IN PROGRESS LIVE 01 Documents against payment - usually written as D/P DONE 02 Documents against acceptance - usually written as D/A DONE 03 Bill of exchange - key instrument in a D/A collection ACTIVE 04 Risk difference between D/P and D/A - stark, and exporters must weigh it QUEUED 05 Exporters - practice, many exporters use a mix QUEUED The bill of exchange is the key instrument in a D/A collection, so it deserves close attention. Step 3 of 5 Bill of exchange IN PROGRESS Documents against payment usually written as D/P DONE Documents against acceptance usually written as D/A DONE Bill of exchange key instrument in a D/A collection ACTIVE Risk difference between D/P and D/A stark, and exporters must weigh it against QUEUED Exporters practice, many exporters use a mix QUEUED The bill of exchange is the key instrument in a D/A collection, so it deserves close attention.
Risk difference between D/P and D/A PAYMENT OPERATIONS IN PROGRESS LIVE 01 Documents against payment - usually written as D/P DONE 02 Documents against acceptance - usually written as D/A DONE 03 Bill of exchange - key instrument in a D/A collection DONE 04 Risk difference between D/P and D/A - stark, and exporters must weigh it ACTIVE 05 Exporters - practice, many exporters use a mix QUEUED The risk difference between D/P and D/A is stark, and exporters must weigh it against the commercial need to offer credit. Step 4 of 5 Risk difference between D/P and D/A IN PROGRESS Documents against payment usually written as D/P DONE Documents against acceptance usually written as D/A DONE Bill of exchange key instrument in a D/A collection DONE Risk difference between D/P and D/A stark, and exporters must weigh it against ACTIVE Exporters practice, many exporters use a mix QUEUED The risk difference between D/P and D/A is stark, and exporters must weigh it against the commercial need to offer credit.
Exporters use a mix PAYMENT OPERATIONS COMPLETE LIVE 01 Documents against payment - usually written as D/P DONE 02 Documents against acceptance - usually written as D/A DONE 03 Bill of exchange - key instrument in a D/A collection DONE 04 Risk difference between D/P and D/A - stark, and exporters must weigh it DONE 05 Exporters - practice, many exporters use a mix ACTIVE In practice, many exporters use a mix of the two terms according to the buyer and the market. Step 5 of 5 Exporters use a mix COMPLETE Documents against payment usually written as D/P DONE Documents against acceptance usually written as D/A DONE Bill of exchange key instrument in a D/A collection DONE Risk difference between D/P and D/A stark, and exporters must weigh it against DONE Exporters practice, many exporters use a mix ACTIVE In practice, many exporters use a mix of the two terms according to the buyer and the market.

Key points of this lesson, in order.

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Documents Against Payment and Documents Against Acceptance

Documentary Collections and SWIFT Category 4, Lesson 3 of 7, Narration 3:19, D06 Cross-border payments

Bill of exchange

What you will learn

Your objective. By the end of this lesson, you will be able to explain documents against payment and documents against acceptance. Documents against payment, usually written as D/P, means the collecting bank may release the documents to the importer only after the importer has paid the full amount stated in the collection instruction.

Why it matters. This matters because cross-border payments involve more banks, more charges, more time and more ways to fail than any domestic payment. Getting the chain right is the job.

Chapter objective: Learner explains documentary collections, the roles of remitting and collecting banks, and the SWIFT Category 4 messages used at each stage. Learner uses real examples with amounts, banks and message names to show how the topic works in practice.

Key learning points

  • Documents against payment
  • Documents against acceptance
  • Bill of exchange
  • Risk difference between D/P and D/A
  • Exporters use a mix

Key terms

Bill of exchange: A written order by one party instructing another party to pay a stated amount to a named person on a stated date.

Payment flow diagram showing Documents Against Payment and Documents Against Acceptance.

Practise this lesson

Exercise

Trace the payment in this lesson through its lifecycle stages.

Use the lifecycle stages in this lesson: acceptance, processing, clearing, settlement, beneficiary credit, ledger posting and reconciliation.

  1. What to do. Name each stage, state what happens, and say when the payment is truly final.

Correct result. Acceptance validates the instruction. Processing prepares it. Clearing sorts and nets it. Settlement moves the funds. Beneficiary credit puts the money in the creditor account. Ledger posting records it. Reconciliation proves it. Finality is only at settlement, not at acceptance or at status update.

Why. The lifecycle is the map of a payment. If you cannot say which stage a payment is in, you cannot answer where the money is.

Check your understanding

Practice question

Which of the following best describes documents against payment and documents against acceptance?

Takeaway and next step

What to remember

The bill of exchange is the key instrument in a D/A collection, so it deserves close attention.

Build a cross-border payment like the one in this lesson and watch the chain, the charges, and the final amount change.

Open the Cross-Border Payment Configurator →

Builds on "Roles: Remitting Bank and Collecting Bank".

Transcript and full text

Show transcript

Documents against payment, D/P, is the form of collection where the collecting bank releases the documents to the drawee only when the drawee pays the amount of the bill of exchange. The drawee pays, the bank releases the documents, and the drawee uses the documents to take delivery of the goods. The exporter is paid when the drawee pays, and the exporter carries the risk that the drawee refuses to pay. D/P is used when the exporter wants payment before the importer takes the goods, and when the goods are shipped on a sight bill of exchange, payable on presentation. Documents against acceptance, D/A, is the form where the collecting bank releases the documents to the drawee when the drawee accepts the bill of exchange, promising to pay on a future date. The drawee accepts the bill, the bank releases the documents, and the drawee takes the goods immediately, but pays later. The exporter carries the risk that the drawee does not pay on the maturity date. D/A is used when the importer needs the goods before it can pay, for example when it needs to sell the goods to raise the money, or when the trade terms give the importer a credit period, such as 60 days or 90 days after shipment. The bill of exchange in a D/A collection is a usance bill, payable at a future date, rather than a sight bill. The bill of exchange is the instrument that makes the collection work. It is a written order, signed by the drawer, the exporter, ordering the drawee, the importer, to pay a stated sum to a stated person on a stated date. A sight bill is payable on presentation, when the drawee sees it. A usance bill is payable at a future date, such as 60 days after sight or 90 days after the bill of lading date. The drawee accepts a usance bill by signing it, and the acceptance is a promise to pay on the maturity date. The accepted bill is a negotiable instrument, and the exporter bank may discount it, paying the exporter before the maturity date and collecting from the drawee on the maturity date. The aval is a guarantee added to a bill of exchange by a bank, normally the collecting bank or the drawee bank. An avalised bill is one where the bank guarantees that the drawee will pay. An aval increases the value of the bill, because the exporter can rely on the bank rather than only on the drawee. An aval is not a letter of credit, and it is not automatic. The drawee bank adds the aval only if it agrees to guarantee the drawee, and it charges a fee for doing so. An SME should ask whether a bill in a D/A collection is avalised, because an avalised bill is much safer for the exporter than a bill accepted only by the drawee. If the drawee refuses to pay a sight bill, or refuses to accept a usance bill, the collecting bank must protest the bill, unless the instruction says otherwise. A protest is a formal statement, made by a notary or a public authority, that the bill was presented and was dishonoured. The protest preserves the exporter right to take legal action against the drawee and against any endorser of the bill. The collecting bank should protest without delay, and should advise the remitting bank of the dishonour by SWIFT, normally with an MT416 advice of non-payment or non-acceptance. A bill that is not protested may lose its legal force, and the exporter may lose its remedy. The instruction should therefore state whether the collecting bank should protest, and the collecting bank should follow that instruction. The maturity of a usance bill is the date the drawee must pay. The maturity is calculated from the tenor, for example 60 days after sight, or 90 days after the bill of lading date. The collecting bank should present the bill for payment on the maturity date, and should advise the remitting bank if the drawee does not pay. The exporter bank may hold the accepted bill until maturity, or it may discount it. If the drawee does not pay on maturity, the collecting bank protests the bill and advises the remitting bank, and the exporter may take legal action. The maturity date should be stated clearly in the collection instruction, and the bank should diary it, because a missed maturity date is a common operational failure. An SME should remember that D/P gives the exporter payment before the importer takes the goods, and D/A gives the importer the goods before it pays. The choice between them is a credit decision, and it should be made by the exporter based on its trust in the importer and its need for cash. A business analyst who advises on collections should ask whether the collection is D/P or D/A, whether the bill is sight or usance, whether the bill is avalised, and what the instruction says about protest. Those four questions determine the risk, the timing, and the handling of the collection.

Documents against payment, D/P, is the form of collection where the collecting bank releases the documents to the drawee only when the drawee pays the amount of the bill of exchange. The drawee pays, the bank releases the documents, and the drawee uses the documents to take delivery of the goods. The exporter is paid when the drawee pays, and the exporter carries the risk that the drawee refuses to pay. D/P is used when the exporter wants payment before the importer takes the goods, and when the goods are shipped on a sight bill of exchange, payable on presentation.

Documents against acceptance, D/A, is the form where the collecting bank releases the documents to the drawee when the drawee accepts the bill of exchange, promising to pay on a future date. The drawee accepts the bill, the bank releases the documents, and the drawee takes the goods immediately, but pays later. The exporter carries the risk that the drawee does not pay on the maturity date. D/A is used when the importer needs the goods before it can pay, for example when it needs to sell the goods to raise the money, or when the trade terms give the importer a credit period, such as 60 days or 90 days after shipment. The bill of exchange in a D/A collection is a usance bill, payable at a future date, rather than a sight bill.

The bill of exchange is the instrument that makes the collection work. It is a written order, signed by the drawer, the exporter, ordering the drawee, the importer, to pay a stated sum to a stated person on a stated date. A sight bill is payable on presentation, when the drawee sees it. A usance bill is payable at a future date, such as 60 days after sight or 90 days after the bill of lading date. The drawee accepts a usance bill by signing it, and the acceptance is a promise to pay on the maturity date. The accepted bill is a negotiable instrument, and the exporter bank may discount it, paying the exporter before the maturity date and collecting from the drawee on the maturity date.

The aval is a guarantee added to a bill of exchange by a bank, normally the collecting bank or the drawee bank. An avalised bill is one where the bank guarantees that the drawee will pay. An aval increases the value of the bill, because the exporter can rely on the bank rather than only on the drawee. An aval is not a letter of credit, and it is not automatic. The drawee bank adds the aval only if it agrees to guarantee the drawee, and it charges a fee for doing so. An SME should ask whether a bill in a D/A collection is avalised, because an avalised bill is much safer for the exporter than a bill accepted only by the drawee.

If the drawee refuses to pay a sight bill, or refuses to accept a usance bill, the collecting bank must protest the bill, unless the instruction says otherwise. A protest is a formal statement, made by a notary or a public authority, that the bill was presented and was dishonoured. The protest preserves the exporter right to take legal action against the drawee and against any endorser of the bill. The collecting bank should protest without delay, and should advise the remitting bank of the dishonour by SWIFT, normally with an MT416 advice of non-payment or non-acceptance. A bill that is not protested may lose its legal force, and the exporter may lose its remedy. The instruction should therefore state whether the collecting bank should protest, and the collecting bank should follow that instruction.

The maturity of a usance bill is the date the drawee must pay. The maturity is calculated from the tenor, for example 60 days after sight, or 90 days after the bill of lading date. The collecting bank should present the bill for payment on the maturity date, and should advise the remitting bank if the drawee does not pay. The exporter bank may hold the accepted bill until maturity, or it may discount it. If the drawee does not pay on maturity, the collecting bank protests the bill and advises the remitting bank, and the exporter may take legal action. The maturity date should be stated clearly in the collection instruction, and the bank should diary it, because a missed maturity date is a common operational failure.

An SME should remember that D/P gives the exporter payment before the importer takes the goods, and D/A gives the importer the goods before it pays. The choice between them is a credit decision, and it should be made by the exporter based on its trust in the importer and its need for cash. A business analyst who advises on collections should ask whether the collection is D/P or D/A, whether the bill is sight or usance, whether the bill is avalised, and what the instruction says about protest. Those four questions determine the risk, the timing, and the handling of the collection.

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