Payment Methods and Financial Instruments Explained

Payment Process

Payments can be made in cash or deferred. Cash payments can be made in different ways:

• Cash: A receipt will be issued to prove delivery.
• Bank Transfer: Cash deposited directly into a current account.
• Checks
• Credit and Debit Cards
• Letters of Credit

Other common payment instruments include:

• Bills of Exchange
• Promissory Notes

Checks

A check is a document regulated by law, instructing a bank to pay a specified amount from the drawer's funds to the payee. The drawer is entitled to dispose of these funds by check.

Key Parties in a Check Transaction

• Drawer (Maker): The person or entity who issues the check.
• Drawee (Bank): The bank ordered to pay the check.
• Payee (Holder): The person or entity to whom the check is payable.
• Endorser: The party who transmits the check by endorsement.
• Guarantor: The party who guarantees payment of the check.

Classes of Checks

• Bearer Check: Payable to any person presenting the check.
• Nominal Check: Payable only to the person named on the check.
  • Transferable by Endorsement: Unless it explicitly states "not to order."
  • Non-transferable: If it includes a "not to order" clause.
• Crossed Check: Features two parallel bars across its face, indicating it must be deposited into an account.
  • General Crossing: Contains no specific bank name between the bars.
  • Special Crossing: Includes the name of a specific bank between the bars, meaning it must be deposited into an account at that specific bank.
• Certified Check (or Guaranteed Check): The drawee bank guarantees payment. The amount shown on the check is locked in the drawer's account upon issuance, ensuring funds are available when presented for payment.
• Account Payee Check (or Non-Cashable Check): The drawee or holder may prohibit its payment in cash, requiring it to be deposited into an account.

Check Presentation and Payment

The holder must present a check for payment within the following periods from the date of issue:

• Checks issued and payable in Spain: 15 days.
• Checks issued in Europe and payable in Spain: 20 days.
• Checks issued elsewhere in the world and payable in Spain: 60 days.

If the due date falls on a holiday, the check is understood to expire on the next working day.

Bills of Exchange

A bill of exchange is a formal document issued by the drawer (seller) to the drawee (buyer), instructing them to pay a certain amount to the payee on a specified date.

Key Parties in a Bill of Exchange Transaction

• Drawer (Maker): The party who issues the bill.
• Drawee: The party ordered to pay the bill.
• Payee (Holder): The person to whom the bill is payable.
• Endorser: The party who endorses the bill.
• Endorsee: The person receiving the bill by endorsement.
• Guarantor: The party who guarantees payment of the bill.

Promissory Notes

A promissory note is a private document where a natural or legal person commits to pay another party a specified amount on an agreed date. The most common types are banking, business, and treasury notes.

Subsidiary Ledgers

Companies maintain subsidiary ledgers to control their financial activity.

• Cash and Banks Ledger: Displays the cash and bank balances.
• Trade Bills Receivable and Payable Ledger: Records bills that are owed to the company (receivable) and bills that the company owes (payable).