Core conclusions:Commercial acceptance bills can be accepted, but the discount rate must be set based on three digits. The payment period ranges from the date of issue to the maturity date, with a maximum of 6 months. The discount cost is typically calculated based on the remaining term of the bill, at an annual rate of 4%. For a bill worth 1 million yuan with a remaining term of 5 months, the discount cost would be approximately 16,700 yuan. In principle, the total balance of commercial acceptance bills for a single customer should not exceed 20% of its annual purchase amount. Additionally, it is important to remember that the acceptor of a commercial acceptance bill must disclose all necessary information about the bill, including credit details. Any bill whose information is incomplete or inconsistent with what is disclosed cannot be discounted by any discounting institution.
1. First, it’s necessary to distinguish between commercial notes and bank checks: the basis of credit is not the same.
Commercial bills are divided into two categories based on the person responsible for accepting them. Bank-accepted bills are accepted by banks, with bank credit as the underlying basis; the banks act as the primary payers. On the other hand, commercial-accepted bills are accepted by entities other than banks, with commercial credit as the basis for payment. Whether the bill can be honored upon maturity depends on the financial situation of the company that accepts it. Similarly, bank-accepted bills have a higher acceptance rate in the market and lower discount rates. In contrast, the discount rate for commercial-accepted bills is directly related to the qualifications of the acceptor. Those with weaker qualifications may even find it difficult to obtain discounts for their bills.
Several key points of the current regulations should be remembered. The “Regulations on the Acceptance, Discounting, and Repurchase of Commercial Bills” stipulate that the payment period for commercial bills shall not exceed six months from the date of issue until maturity. For bank acceptance bills and financial company acceptance bills, the maximum balance of accepted bills cannot exceed 15% of the accepting entity’s total assets. Additionally, the balance of margin funds cannot exceed 10% of the accepting entity’s deposits absorbed. These regulations are constraints placed on financial institutions, not guarantees related to the bills in your hands. For commercial bills, the regulations require the acceptor to disclose important details about the bill and credit information. Discountors must verify this information before conducting discounts. If the information does not match or is inconsistent with what has been disclosed, the discount cannot be carried out.
| bill type | credit Foundation | Management of maturity risk |
|---|---|---|
| bank acceptance bills | Bank credit: Banks are responsible for making the initial payments. | The discount channels are well-established, and banks will fulfill the payments upon maturity. |
| Commercial acceptance bills (high-quality entities) | The accepting enterprise has publicly disclosed relevant information. | Discounting is available upon inquiry. Please note that there will be a discounting cost involved. |
| Commercial acceptance bills (weak entities) | The accepting company has incomplete information regarding creditworthiness. | Discount limit has been set. It is recommended to opt for installment payment instead. |
II. Let’s do some calculations: Accepting a commercial bill is equivalent to providing the customer with an interest-free loan.
Suppose a customer wants to purchase goods worth 1 million yuan, and requests to receive a commercial acceptance bill with a term of 6 months. The delivery of the goods will occur immediately, while the payment will be made 6 months later. If there is an opportunity cost associated with this transaction, calculated at an annual interest rate of 8%, then the capital cost for keeping the funds idle for 6 months would be approximately 40,000 yuan. On the other hand, if the customer chooses to discount the bill and receive the money upfront, with an annual interest rate of 4%, then the discount cost for a bill worth 1 million yuan with a remaining term of 5 months would be approximately 16,700 yuan. In reality, the customer would receive around 983,300 yuan after deducting the discount cost.
These two numbers represent the starting point for negotiations. Either include a 6-month payment period in the offer, or shorten the payment period to 3 months. Alternatively, one could request that the other party convert the commercial bill into a bank acceptance bill. The least desirable approach is to neither adjust the price, nor shorten the payment period, nor change the type of bill. This would leave all the financial pressure on oneself, and only when there is a need for money would one realize that it’s impossible to obtain any bills at all.
Three or four red lights: If there are two or more red lights, don’t accept the bill at all.
The first signal is that the information disclosed about the acceptor is incomplete, or the disclosed details do not match those recorded on the bill. Such bills are even rejected by discounting institutions. The second signal is that the accepting company has experienced continuous overdue payments in the past two years, or it has been listed on the list of companies guilty of dishonesty in the bill market. The third signal is that the cumulative balance of this customer’s commercial bills in your hands exceeds 20% of their annual purchase limit, indicating a high concentration of risks. The fourth signal is that the other party refuses to provide any form of guarantee, collateral, or joint liability with third parties, and at the same time, they do not accept bulk purchases.
If two or more of the four signals are present, it is recommended to switch to installment payments or shorten the payment period. Checking the first two signals does not require any cooperation from the other party; public information channels can be used to obtain details about the acceptor’s overdue records and disclosures. This process can be completed in just a few minutes.
IV. Three key terms that must be clearly stated in the contract
It was informed that orders involving commercial invoices must include at least three additional clauses in the contract. The first clause concerns the terms related to the payment period and settlement method. It specifies the type of invoice, the name of the acceptor, the amount of the invoice, the date of issue and maturity date, as well as the relationship between the invoice and the payment obligations. This is necessary to avoid disputes where the buyer receives the invoice but the payment obligations remain unfulfilled. The second clause deals with liability for late payment. It outlines how liquidated damages should be calculated in case the invoice is not paid on time, how interest will be borne, and the buyer’s obligation to pay the full amount in cash after the deadline has passed. The third clause addresses the rights to suspend deliveries and terminate the agreement. It stipulates that if the invoice becomes overdue, the acceptor is listed as a debtor who cannot fulfill their obligations, or other factors affect the buyer’s ability to pay, the seller has the right to suspend further deliveries and demand early repayment of the outstanding amount.
There is another detail that can be easily overlooked: the payee’s name on the bill, the amount in both uppercase and lowercase letters, and the continuity of the endorsements. It’s better to check these three items immediately upon receiving the bill, rather than waiting until one week before the due date to discover that the endorsements are not continuous. Bills with discontinuous endorsements will cause problems during subsequent transfers and discounting processes.
5. Common questions
1. The customer is a long-term partner, so there’s no need to worry about commercial invoices, right?
The duration of cooperation does not equal the ability to make payments. What determines the risk associated with commercial invoices is the financial situation of the company responsible for accepting them, rather than how many years you have been cooperating with each other. In terms of approach, it’s useful to leverage long-term relationships: precisely because the cooperation is stable, there is a foundation upon which we can discuss lengthening the payment period or even using cash instead of invoices. For long-term customers, it’s important to maintain detailed records, including information on each invoice’s recipient, amount, and expiration date. This helps prevent multiple invoices from expiring at the same time.
2. What should I do if the commercial bills that have been received cannot be discounted?
First, we need to verify two things. The first is whether the information disclosed on the bill is complete and consistent with what is stated on the bill itself. If there are any discrepancies, the discounting institution should not process the transaction under such circumstances. In such cases, it is necessary to directly contact the acceptor to obtain a replacement bill or request payment in cash. The second thing to check is whether the bill is in a transferable state, and whether the endorsements are continuous. If both of these conditions are met, but the bill still cannot be discounted, it usually means that the acceptor lacks sufficient qualifications. In this case, it is advisable to opt for collection upon maturity, while simultaneously initiating the procedures stipulated in the contract regarding suspension of deliveries and debt collection. There is no reason to continue accepting new bills from this entity.
3. Can bills be used to pay for upstream payments?
Yes, but there are certain conditions: when transferring a bill through endorsement, the endorsee has the right to verify the information on the bill according to the regulations of the People’s Bank of China. If the information provided does not match the disclosed details, the recipient may refuse to accept the bill. Therefore, transferring a commercial bill to a supplier essentially means transmitting the same risk of credit default. Suppliers usually also verify bills using similar standards. If the supplier has good qualifications and can directly accept bank drafts, then converting the commercial bill into a bank draft for payment would be more successful. However, this approach comes with a cost, namely the need to bear some fees related to discounting or issuing new bills.
For factories engaged in domestic trade, it’s not that they cannot accept commercial bills. Instead, each bill represents an account receivable that needs to be recorded properly. Before accepting a bill, it’s more efficient to confirm three aspects: the information about the acceptor, the cumulative exposure ratio, and the terms of the contract. This way, there’s no need for additional efforts after the fact.
Qihang Zhilian Foreign Trade Research Institute·Let China's intelligent manufacturing industry set sail to sea·Tel: 180-0327-6609
