How To Pay Suppliers in India
As an entrepreneur or business owner, sourcing products from international suppliers can be a lucrative way to expand your product line and increase profits. However, when it comes to paying your suppliers, it can be a bit daunting to navigate different currencies, payment methods, and government regulations.
In this article, we will provide some tips and insights on how to make supplier payments to Indian suppliers in an efficient and cost-effective manner.
Paying for samples
Before placing a larger order, it is common practice to request samples from your supplier to ensure the quality of the products. When paying for samples, many Indian suppliers will provide you with the cost in Indian Rupees (INR). While some suppliers may accept payment through PayPal, it is essential to verify this with your supplier beforehand.
Another option for paying for samples is to use a platform like Airwallex. Airwallex allows you to pay for samples in INR from your global account, providing you with flexibility and convenience. Additionally, using Airwallex can help you avoid high currency exchange fees and ensure that your payments are processed quickly.
When it comes to organizing freight, you have two options: either you can arrange the shipment yourself or ask the supplier to organize it for you. If the supplier offers to arrange the shipment, it is advisable to see if they can use their courier account to save you money on shipping costs. As suppliers typically have better rates and established relationships with couriers, you can save money on shipping by using their account.
Placing an order
When placing an order with an Indian supplier, it is normal to pay a deposit of at least 30%. However, some suppliers may ask for 50% on your first order. It is important to establish these payment terms with your supplier upfront, so you are aware of what is expected of you.
The balance is typically paid on the Bill of Lading (BOL), which is a document that provides details about the shipment, including the name of the carrier, the port of departure, and the destination port. It is important to ensure that you have the necessary funds available to pay the balance when the BOL is issued.
Paying in USD
Indian suppliers typically quote and require payments in US dollars (USD), regardless of where you are situated. This is a requirement of the Indian government for all exports. While this may seem inconvenient, paying in USD can actually be beneficial for you in terms of currency stability and predictability. It is important to factor in any exchange rate fees that may apply when converting your local currency to USD.
At ISN, we recommend that you consider opening an Airwallex Global Account to pay your Indian suppliers. The Airwallex Global Account provides you with the flexibility to pay your supplier for samples in the local currency from your US or any other global currency account. Additionally, you can pay small amounts without any issue, making it a convenient and cost-effective solution for paying your suppliers.
Another benefit of using Airwallex is that it is an approved Payment Service Provider (PSP) for Amazon. If you do not reside in the US, you will need a PSP like Airwallex to receive your Amazon payments every fortnight. Airwallex offers competitive rates, and many of our clients have reported significant savings by using their platform.
Telegraphic Transfer is a secure and efficient way to pay your Indian suppliers. With TT, you electronically transfer funds from your bank account to your supplier’s bank account in India. It’s a preferred payment method for 99% of businesses due to its reliability and speed.
To make a TT payment to your Indian suppliers, you’ll need their bank account details, including the bank name, branch address, and account number and swift code. You’ll also need to provide your bank with the required information, including the amount to be transferred, the currency, and the purpose of the transfer.
TT payments are typically processed within a few business days and are subject to bank fees and exchange rates. It’s essential to confirm these fees with your bank and supplier to ensure you’re aware of all costs associated with the transaction.
Benefits of tying payments with quality inspections
As a business owner or entrepreneur sourcing products from international suppliers, ensuring quality is a top priority. Quality inspections are an essential part of this process, but they can be costly and time-consuming.
However, by tying payments to quality inspections, you can incentivize your suppliers to provide high-quality products while also reducing the risk of defective or subpar goods.
One of the primary benefits of tying payments with quality inspections is that it incentivizes your suppliers to prioritize quality control.
If suppliers know that they will not receive full payment until the products pass inspection, they are more likely to take the necessary steps to ensure that the products meet your standards.
Additionally, tying payments with quality inspections can help you save time and money in the long run. By catching any issues early on, you can avoid costly delays or rework, which can impact your bottom line.
You can also avoid paying for defective or subpar products, as you can withhold payment until the issues are resolved.
Indian suppliers typically quote and require payments in US dollars (USD)
Tips for tying payments with quality inspections
-When tying payments with quality inspections, it is essential to establish clear payment terms with your suppliers upfront. This includes outlining the percentage of payment that will be held until the products pass inspection, as well as any specific criteria that the products must meet. This can include factors such as product dimensions, weight, materials, and functionality, among others.
-It is also important to ensure that your quality inspection process is thorough and consistent. This can involve creating a detailed checklist of the criteria that the products must meet, as well as establishing a timeline for inspections. It may be beneficial to work with a third-party inspection service to ensure that the inspections are objective and unbiased.
-Another important factor to consider when tying payments with quality inspections is the frequency of inspections. Depending on the nature of the products and the supplier’s track record, you may need to conduct inspections at multiple stages of the production process. This can help catch any issues early on and avoid delays or rework down the line.
-Finally, it is important to establish a clear process for handling any issues that arise during inspections. This can include outlining how suppliers will be notified of any issues and the steps they need to take to resolve them. By establishing a clear process upfront, you can ensure that any issues are addressed promptly and that the products meet your standards.
Understanding payment terms is crucial when doing business with Indian suppliers.
-For the first order, most suppliers require a 50-50 payment arrangement – 50% payment is made when the order is placed, and the remaining 50% is paid when the products are shipped.
-For subsequent orders, the payment arrangement is often 30-70, where 30% is paid as an advance and the remaining 70% is paid when the products are shipped.
In addition, some suppliers may offer credit terms of 30 or 60 days. This means that payment is made 30 or 60 days after the shipment is done.
Making supplier payments to Indian suppliers can be a complex process, but by following these tips and recommendations, you can ensure that your payments are made efficiently and cost-effectively.
Whether you decide to use Airwallex or another platform, it is important to establish clear payment terms with your supplier and factor in any currency exchange fees or shipping costs.
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