Cash in advance requires the buyer to pay before the seller ships goods or performs the agreed service. Payment may cover the full order or a deposit followed by milestone payments. The contract should tie each payment to a clear obligation.
How does Cash in Advance work in practice?
The buyer sends all or part of the price before the supplier ships or completes performance. The supplier then produces or releases the goods under the agreed order. The buyer should connect the prepayment to a specific contract, invoice, milestone and beneficiary account, because payment recovery can be difficult if the supplier delays, ships non-conforming goods or fails.
What should a business document for Cash in Advance?
Keep the quotation, order, payment request, receipt, production authorization, delivery commitment and refund or cancellation terms.
What should a business verify before relying on Cash in Advance?
The method protects the seller’s cash position but shifts performance risk to the buyer and may weaken the offer in competitive markets.
