Paying Robot Suppliers Safely

Who carries the risk under each method

The US International Trade Administration's guide to methods of payment ranks the options by risk. Cash in advance is safest for the seller and riskiest for you, because the money leaves before the goods are yours. Letters of credit, which the guide calls one of the most secure instruments available to international traders, sit in the middle, with a bank paying only when agreed documents are presented. Documentary collections cost less than letters of credit but give less recourse. Open account terms, with payment typically due 30 to 90 days after shipment, favor the buyer. If a maker insists on money up front, your job is to narrow that exposure rather than hope to remove it.

Tie deposits to milestones, not dates

Instead of paying on calendar dates, link each payment to evidence. One workable structure starts with an order deposit, then releases further sums when a factory acceptance test is passed and witnessed, when shipping documents are issued, and when the robot passes acceptance at your site. Write the test criteria into the purchase order so a milestone cannot be declared met on the maker's word alone. Hold back a final retention until commissioning and training are complete, because that is when missing parts and software gaps come to light. For pre-orders, ask whether the deposit is refundable and whether the maker keeps it in a separate account. Settle all of this before the pro forma invoice arrives.

When a letter of credit or escrow fits

A letter of credit suits larger first orders with a maker you have not bought from before. Your bank commits to pay once the seller presents the documents listed in the credit, so list the ones that prove what you care about: a signed factory acceptance report, an inspection certificate from a named inspector and the bill of lading. Banks examine paperwork rather than robots, so vague document wording weakens your protection. Expect bank fees and a slower set-up than a plain transfer. For smaller orders, an escrow service can hold your payment until delivery is confirmed. Check that the escrow provider is licensed where it operates, and never accept an escrow site proposed only by the seller.

Stopping payment fraud before you wire

Even a well-structured deal fails if the money goes to a fraudster. In its advice on business email compromise, the FBI tells businesses to confirm requests using phone numbers looked up from an independent source rather than those in the message, to train staff to watch for a change in a vendor's payment location, and to require a second check, such as a phone call, before significant transfers. Apply those steps to every robot order. Take the maker's bank details from the signed contract, treat any email announcing new details as suspect until a known contact confirms it by phone, and have a second person approve each transfer. Send a small test payment first when paying a new account.

Sources and further reading

• Methods of Payment — International Trade Administration, US Department of Commerce.
  Compares cash in advance, letters of credit, documentary collections and open account by the risk each side carries.
• FBI Tech Tuesday: Building a Digital Defense Against Business E-mail Compromise Scams — Federal Bureau of Investigation.
  FBI advice on verifying payment requests and spotting fake changes to a supplier's bank details.

Common questions

How much deposit should I pay for a robot order?

There is no standard figure. Keep the deposit as small as the maker will accept, link the rest to tests and shipping documents, and ask for a refund clause. Larger deposits deserve stronger security, such as a letter of credit or an advance payment guarantee from the maker's bank.

Is it safe to pay a robot supplier by wire transfer?

A wire is fast but hard to reverse, so it is only as safe as the account details you use. Confirm those details through a known contact by phone, start with a small test amount for a new account, and keep larger sums tied to milestones you can verify.