Order letter and Credit Letter
Order letter and Credit Letter: An “Order” is an expense for the person placing the order and an income for the one getting it. But this is not all. The company that bags the order has to fulfill lot of commitments to ensure that it has a satisfied customer, which can be an individual or another company. Timely delivery of the order, quality of delivery and after sale service are all part and parcel of getting an order.
The quotations are the ‘offer’ made by the seller and the order through a letter is the ‘acceptance’ of the offer. This offer is the link which establishes a legal relation between the seller and the buyer and therefore buyer can purchases and seller can sell goods or services. Simply, a letter of order is an instruction from a buyer to a” seller to supply goods or services.
In broad, sense, an order letter is a letter which carries messages to the seller requesting him to send the specified goods on stated terms and conditions agreed upon previously.
An Order Letter is the one that is written by the person/company placing the request of purchase from another company. This letter comes into action only when a detailed study of the desired product has been done in the market and based on promised service, quality and price of the product, a decision for a purchase has been made.
An Order Letter should be drafted very carefully as it needs to pen down all the terms and conditions of the purchase for the benefit of both involved parties. It should have details such as product specifications, quantities, price agreed upon, delivery date, late delivery clauses, etc. It should be addressed to the person responsible for the execution of the order with a copy to the head of department. Since it is totally an official letter it should be typed.
Do’s and Don’ts of Order Letter
- An Order Letter should be addressed to the person responsible for executing the order
- It should include all the terms and conditions agreed upon by both involved parties
- Since it is purely an official letter it should be typed out
- There is no need to use too many adjectives in the letter since it is purely for an order being placed
- The letter should have all relevant details related to the order, for example, quantity, price and other terms and conditions
Sample Order Letter
Name of the person to whom order is being placed
Name and address of the organization
Name of the person placing the order
Name and address of the organization
Date:
Subject: Order for 100 copies of Mastering Business
Dear Sir or Madam,
As per our discussions on __________ (date of meeting) we are pleased to place an order for 100 copies of Mastering Business book by _________ (writer) for Class VII for the CBSE Board on the following terms and conditions:
- The cost of each book will be Rs.________ (inclusive of all taxes)
- Payment terms will be a post-dated cheque for 50% advance with order. This cheque will be cleared on the day of the deliver. The balance payment of 50% 7 days after delivery and after random inspection
- Delivery will be done within 7 days from the order date
- Delivery will be done at ________________ (address of organization)
- If the order is not delivered as per the above terms and conditions, the order stands cancelled
Please find enclosed chequenumber ________ dated ________ for Rs.________ towards advance for the order.
Hoping to have a long business relationship with you.
Best regards,
(Name of signing authority)
Order Confirmation Letter and Order Letter
A letter that acknowledges the receipt of order from buyer is known to be order confirmation letter. It is a letter that tells the buyer (Sender) that the order has not been lost, misplaced or stolen and also indicates that proper steps are being taken to satisfy the buyer, sometimes if there is any delay for shipment according to order placed, the reason is also communicated to buyer through such letter:
Order confirmation letter must express the seller’s pleasure and gratitude must appreciate buyer’s interest in the goods and must be a medium of mentioning the favorable aspects of the goods, terms and other services. Such a draft will create a psychological value upon the goods and services to be shipped.
Acknowledgment through-such letter provides a legal acceptance of all the points mentioned in the order. Hence, the order must be read carefully before accepting and acknowledging it.
Credit Letter
letter of credit is a piece of document that serves as instruction of guaranteed payment from the buyer to the seller. Also known as a documentary credit, a letter of credit is issued by the bank and acts as a promise of timely payment to the seller.
If the buyer supposedly fails to perform his due obligation, then the bank pays the seller on behalf of the buyer who in turn repays the bank. This is a brief summation of the letter of credit process.
Types of Letters of Credit
There are mainly four types of letter of credit examples.
- A revocable letter of credit
- Revolving letter of credit
- A standby letter of credit
- Irrevocable letter of credit
Advantages of letter of credit
- A letter of credit gives the trade partners an ability to transact with unknown partners or in newly established trade It helps in expanding their business quickly into new geographies.
- A letter of credit is safer for the seller or exporter in case the buyer or importer goes bankrupt. Since the creditworthiness of the importer is transferred to the issuing bank, the bank must pay the amount as agreed in the letter of credit. Thus, a letter of credit insulates the exporter from the importer’s business
- A letter of credit is highly Both the trading partners can put in terms and conditions as per their requirements and arrive at a mutual list of clauses. It can also be customised from one transaction to another with the same trading partners.
- In the case of a dispute between the trading partners, a letter of credit accounting allows the exporter to withdraw the fund as agreed upon in the letter of credit and resolve the disputes later in the The beneficiary’s
- Right to the full amount is described in the phrase ‘pay now, litigate later’ by the courts.
Disadvantages:
- A letter of credit adds to the cost of doing Banks charge a fee for providing this service, and it can increase steeply if the parties want to put some additional features
- A letter of credit poses a material fraud risk to the The bank will pay the exporter upon looking at the shipping documents and not the actual quality of goods. Disputes can arise if the quality is different from what was agreed upon.
- A letter of credit life cycle has an expiration date, and therefore the exporter has time limitation within which he will have to deliver the goods by all means. At times, this haste creates a mess.
ANNEX 1 IRREVOCABLE LETTER OF CREDIT
SIGHT DRAFT
LETTER OF CREDIT NO.: __________
DATE OF LETTER OF CREDIT: ______________
DATE OF DRAFT: ______________
TO: (BANK)
(ADDRESS)
(FAX):
ATTENTION: ______________
FOR VALUE RECEIVED
PAY ON DEMAND TO: DEUTSCHE BANK NATIONAL TRUST COMPANY, DBTCA FOR DBNTC AS FSA FOR WCI, INC, USD ____________________________ DOLLARS (USD $____________). THE AMOUNT OF THIS DRAFT DOES NOT EXCEED THE AMOUNT AVAILABLE TO BE DRAWN BY THE BENEFICIARY UNDER THE LETTER OF CREDIT.
WE ACKNOWLEDGE THAT, UPON YOUR HONORING THE DRAWING HEREIN REQUESTED, THE AMOUNT OF THE LETTER OF CREDIT AVAILABLE FOR DRAWING SHALL BE AUTOMATICALLY DECREASED BY AN AMOUNT EQUAL TO THIS DRAWING.
CHARGE TO ACCOUNT OF [APPLICANT].
DRAWN UNDER [NAME OF BANK] LETTER OF CREDIT NO. ___________.
FUNDS TO BE WIRED TO:
ABA ROUTING NUMBER: ______________
RECEIVING BANK: ______________
BENEFICIARY: _________________
ORIGINATING BANK INFORMATION (OBI FIELD):
VERY TRULY YOURS,
BY ______________________________________
NAME:
TITLE:
DATE: