At Sight

What Is At Sight?

At sight is a payment due on demand where the party receiving the good or service is required to pay a certain sum immediately upon being presented with the bill of exchange. This type of payment is also known as a "sight draft" or a "sight bill."

Understanding At Sight

At sight is used most often in legal contracts to describe when payment is to be made. A seller might place an at sight clause in a contract to require full payment upon demand, especially if the buyer has missed payments in the past and is deemed to have a higher risk of default.

At sight transactions are frequently part of the sale of exports. The seller or exporter of a good might be paid through what is called a sight letter of credit or a letter of credit at sight. Using this method ensures that the seller will be paid at sight upon satisfying the requirements outlined in the letter. This can include, among other things, proof that the goods have been shipped to the buyer.

Payment has already been made by the buyer in this type of transaction. However, the funds will only be released to the seller once the criteria are satisfied.

The seller typically must take the bill of lading (BoL) after they have resolved all the shipping matters necessary with customs for export transactions under a letter of credit at sight. The exporter would then take the BoL and present it along with the letter of credit and other required documentation to the bank for payment to be released.

Important

The timing of the release of payment can create liquidity issues for businesses that have not planned for the submission of documentation to receive payment.

Benefits of At Sight

This type of at sight transaction offers protections for both the buyer and seller because payment is guaranteed to the seller but is only released once the goods are accounted for on behalf of the buyer.

Companies selling goods to volatile nations generally prefer to be paid promptly. They are mindful that political unrest and financial turmoil could jeopardize future payments, particularly if it leads the buyers’ currency to fall.

In emerging and frontier market economies, it is not unusual for currency valuations to swing wildly, meaning that the local cost of buying something in U.S. dollars (USD), for example, can frequently change. An overseas customer may agree to buy a certain product and pay for it at a later date, only to discover later on that the depreciation of its local currency has made it much more expensive to purchase.

At Sight vs. Upfront Payments

At sight transactions are different from upfront payments, which are common in retail. Both transactions may require payment on demand.

Upfront payments are made immediately upon ordering goods either in a store or online. The funds are given to the seller at the time the original sale is made.

This differs from at sight exchanges, which are dependent on documentation being filed to complete the transaction. While there is immediacy for the completion of the funds' transfer, it can be delayed while documentation is gathered for submission.