The 4 Most Trusted Payment Methods for Sourcing is a document to help Alibaba users understand the 4 payment methods available to them including tips and hints on how to make payments safer and why you would use each payment type.

1. Many of you reading this
article will be disappointed to
know that there is no
foolproof method of payment
that can eliminate sourcing risk
completely.
Simply put, reducing risk for
one party means increasing
risk for the other.
Involving third parties in
transactions can help, but even
third parties cannot guarantee
everything during the sourcing
process will happen smoothly.
Not to say that risk can’t be
reduced. It can, and for both
parties as well.
© 2010 - The Four Most Trusted Payment Methods For Sourcing - Page

2. To start, effective communication is crucial for all business deals. When you’re dealing with foreign company representatives that don’t even
speak your language, this is even more crucial. Unexpected results can occur in even the most mundane aspects of business, simply because
things are done differently in different parts of the world.
To resolve this issue, make sure you ask any and all questions you have regarding their procedures. Always be courteous, ask for detailed
answers, and don’t forget to let suppliers know a little about yourself as well. Suppliers can sometimes provide you with useful suggestions,
though that is only possible if conversations are fluid and friendly. If anything unexpected happens, don’t focus on the problem; instead seek
out a solution that both parties can agree upon.
Secondly, a smart buyer should always perform detailed research on their product, industry and suppliers in order to minimize risk. Ask
potential suppliers about product quality, lead times, types of equipment available, sampling policies, previous clients, etc. Note the responses
for not only the information given, but also their service attitude. Detailed customer service and answers go a long way in showing how well a
supplier can tackle issues if or when they occur.
Finally, here are four of the most widely accepted methods in the sourcing industry, as well as how you can best put them to use.
Telegraphic Transfer (T/T) After Sales Collection
PROS: BEST USED FOR: PROS: BEST USED FOR:
Fast, requires little to no Sample orders or small orders. Safest method for buyers. Long term contracts. Suppliers
paperwork, widely accepted. Sample orders are precursors of seldom agree to collect payment
more business ahead so suppliers after delivery because it puts
CONS: are highly unlikely to skip town CONS: them at a huge disadvantage.
Once you send it, the money is with your cash and rob Rarely accepted unless for However, suppliers are always
gone. themselves of future trusted customers. happy to strike long term deals,
RISK TO BUYER: opportunities. RISK TO BUYER: so if you find one you like, try
Medium to High. Low. negotiating collection payment
into a contract.
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3. Letter of Credit (L/C) Escrow Service
PROS: BEST USED FOR: PROS: BEST USED FOR:
Safe for both parties. Agreements of significant value. Safe for both parties. Small or trial orders. Escrow
L/Cs are legally binding services are ideal for buyers
CONS: agreements CONS: working with a supplier for the
Contract negotiation can get that guarantee the transfer of a Has a price tag. first time or suppliers whose
tricky. buyer’s funds once goods have reliability is in question. When
RISK TO BUYER:
RISK TO BUYER: been delivered. Most L/Cs include Low. using escrow services, buyers will
Low to Medium. additional clauses that must be have to foot a slightly larger bill,
met for payment to be made. though most will argue that the
While these clauses increase increased security is better than
security for buyers, they add losing an entire order due to
additional pressure on the unforeseen circumstances.
suppliers and may cause prices to
go up .
About Alibaba.com
Alibaba.com (HKSE: 1688.HK) is the global leader in e-commerce for small businesses and the flagship company of Alibaba Group. Founded in
1999, Alibaba.com makes it easy for millions of buyers and suppliers around the world to do business online.
© 2010 - The Four Most Trusted Payment Methods For Sourcing - Page 3