Introduction to finance bill
- Finance Bill refers to the bill that is strongly representative of the country’s finances, about what is paid in amount and what is received.
- It is a receipt signifying the exchange made between two parties’, in this case countries’ international trade.
- It is a written order sent by one party to another in promise of receiving goods for an amount of money paid or to be paid on a predetermined date.
Understanding Finance Bill
Finance Bill is the receipt of trade between two countries, one of whom is the drawer and the drawee. The drawer is the exporter and the drawee is the importer. A finance bill aids in extracting promise of payment for such a transaction, that shows the indebtedness of the debtor to the creditor. It is not an outright contract but the terms are agreed beforehand with sufficient allowances and relaxations to the deal. Interest is usually not charged, but is generally added when an extension is allowed.
Promissory notes are often confused with finance bills because of the similarities they share with regard to time period and promise of payment. However, promissory bills are untransferable and are often issued by the debtor to the creditor to depict the promise. A finance bill though, is issued by the creditor to the debtor and can be transferred to a third party.
Highlights of Finance Bill
A cheque and a finance bill may also share similarities but where cheques are solely issued by banks, while the parties in finance bills may or may not involve a bank.
Finance bills can be bought and sold on secondary markets, though it is not open for domestic investors. Only banks and other financial institutions handle these transactions since they’re between countries and value large amounts of money.
Finance bills are most useful in international trade since they easily adjust to the risks that such a trade and its fluctuations pose.
