In order to know as accurately as possible what a particular word from a business vocabulary means, it is better to turn to legislative acts. In this article we will analyze the meaning of the term “collection”. This concept is reflected in article number 874 of the second part of the Civil Code. According to it, in settlement operations under the collection scheme, a credit institution must, on behalf of its client and at its expense, take a set of actions to receive payment or acceptance from the payer under the agreement (consent to pay is implied).
Collection is a transaction that is often used in international payments. In this case, the exporter brings a collection order to the servicing bank and attaches the accompanying documents to it. Note that not every financial institution provides such services. The credit institution, in turn, sends the order to the country of delivery of the goods, to the corresponding bank, which will interact with the importer. A correspondent financial institution issues commodity documents to the importer, receiving a payment from him, which is transferred to the original bank, and then to the exporter.
There are several varieties of collection - this is the so-called clean and documentary. Documentary is almost always accompanied by the transfer of commercial or commodity documents. It is considered quite risky, because there is a temporary gap between receiving the final payment and the initial transfer of documents to the bank and the shipment of goods. In addition, when a package of documents arrives at the corresponding bank, the importer may not have the means to pay or even become bankrupt.
What schemes are used to reduce the risk of operations with collection? These are the so-called operations with a pre-received guarantee from the corresponding bank. It is transferred by this credit institution to the bank, which works with the exporter. And he, in turn, provides bank guarantees for the exporting company.
Net collection is an operation when goods documents are not transferred. Instead, during the operation, financial documents are circulated (check for collection, bills of exchange, etc.). In this case, if a person owns, for example, a check of a foreign bank by which it is possible to receive money in a limited time, he can contact a Russian bank for the aforementioned transaction. The Russian financial institution will require the client to present a passport and fill out a number of documents. After that, the check will be taken and sent by interbank mail to the issuing bank. If everything is in order with the financial document, the foreign credit institution will transfer the money to a Russian bank, and he, in turn, will transfer it to the original holder of the check.
Also, foreign banks may be sent the currency for collection. This transaction, in accordance with federal regulatory act No. 173 (adopted in 2003, December 10), is among the possible transactions concluded between residents of our country. In particular, Sberbank OJSC accepts foreign money for collection in Russia.