Advantages of a bill of exchange.
The bill of exchange is a very important and useful document in modern commerce. Its main advantages are summarized below.
(1) Written verification of debt. The accepted bill of exchange shows the amount owned by a person and the exact date of payment. In case of delay or nonpayment the payment can be enforced on him in the court of law.
(2) Negotiable Instrument. The bill of exchange is a negotiable instrument. Being transferable it enables increase in commercial transactions.
(3) Discounting facility. The b of exchange being a negotiable instrument enables the payee or holder to obtain prompt cash by discounting it with a bank. The banks consider the discounting of bills of exchange as a very useful investment.
(4) Easy transfer of money. With the help of bill of exchange the money can be easily transferred merely by signing and delivery of the bill. The risk involved in the actual transfer of money is thus avoided.
(5) Self liquidating credit. A businessman can easily purchase goods by promising to pay a specified sum at a determined future time to the seller. Before the maturity of the bill he can arrange to sell the goods in the market and the proceeds can be used for meeting the obligation A bill of exchange is thus a self liquidating credit.
(6) Facilitates foreign trade. The bill of exchange facilitates settlement of international obligations. It thus helps in promoting trade between nations.
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