The parties to the transaction accept certain obligations towards each other, and the first commitment of the seller to the buyer is to prepare and send the goods according to the contract, and the buyer is obligated to pay the transaction amount. There have been many methods for payment in transactions for a long time and now these methods are used after going through the stages of evolution. Also, it seems that with changes in the field of international trade, these methods have grown more and help to facilitate the flow of trade. However, in most of the international business texts, among the payment methods, four methods have been specially emphasized, which are examined in this chapter. These four methods are:
1. Payment based on open account
2. Payment based on invoice (receipt)
3. Payment based on advance payment
4. Payment by letter of credit
Choosing a payment method is generally made by the parties in an agreement and depends on several factors. These factors include:
•The duration of cooperation between the transaction parties and the level of trust between them
•Political, economic and legal situation in buyer and seller countries (risk level of countries)
•The financial position of the parties and especially the buyer
•Geographical distance between buyer and seller
• Number of transactions, payment deadline and transaction amount
• The opportunity to earn credit and related expenses