It was in the 12th century that the Order of the Templars (religious and military order) invented the bill of exchange . In the past, pilgrims had to travel with sufficient financial resources to be able to live long months. It was then that the Order of the Templars drew up a bill of exchange for the pilgrim. The latter thus allows them to recover in Jerusalem the sum of money left when he left . This tire thus secured travelers in the Middle Ages.
The bill of exchange is a means of payment which allows the initiating person (the drawer) to give the order to a designated person (the drawee), to pay a sum of money (at a scheduled deadline) to himself or to a third party.
The Bill Of Exchange Is Based On A Tripartite Relationship:
- The drawer or creditor
- The drawee or debtor
- The beneficiary of the payment (in principle the drawer)
Finally, this commercial document mentions a debt and defines the terms of payment.
The use of bills of exchange is mainly used in B2B transactions, from professional to professional.
What Is The Difference Between A Bill Of Exchange And A Check?
The check is a kind of bill of exchange used to make a payment. It consists in making pay the drawer (the issuer of the check), and in the name of the drawer, a sum of money to the beneficiary.
Three Stakeholders When Paying By Check:
- The drawer: issuer of the check
- The drawee: the bank that makes the payment of the check
- The beneficiary: the person who receives the payment.
Good To Know: The provision of the check must exist upon signature, while for the bill of exchange, the provision must be made for the day scheduled for payment. The bill of exchange may specify that the amount mentioned will earn interest while for a check this is not allowed.
Who can issue a bill of exchange?
It is the supplier (the drawer ) who drafts the bill of exchange and sends it to his client (the drawee ) for acceptance.
What Is A Bill Of Exchange For?
You should know that each stakeholder benefits from the use of a bill of exchange.
- The creditor (Supplier) is paid instantly when he calls for the discount.
- The customer (debtor) has a deadline for payment.
- The bank can apply interest or also agios on the discount.
It is also an additional security thanks to the principle of solidarity of the signatories towards the beneficiary.
What Should A Bill Of Exchange Include?
Pursuant to Article L.511-1 of the Commercial Code , the bill of exchange must include several mandatory information. In the absence of certain information, it becomes obsolete.
In order to cash a bill of exchange , your client must first return the signed document to you. His signature has value of acceptance, it represents in parallel a guarantee of payment and therefore the reliability and the seriousness of your customer. By his agreement, he therefore accepts the terms and the amount to be paid to you. He can no longer retract, he is in what we call an IOU.