How to Get Paid by a Philippine Buyer: Payment Terms, T/T Risk, and What to Do When They Do Not Pay

How to Get Paid by a Philippine Buyer: Three Tiers by Order Size

Sort your payment terms by order value: small orders fully prepaid, mid-size orders on deposit plus payment against documents, large orders on a letter of credit. That single rule is the whole article; everything below is detail.

• Small first orders (roughly under USD 50,000). Push for 100% advance T/T. Fall back to a 30–50% deposit with the balance cleared before shipment. At this size a buyer who genuinely wants the goods will usually pay; the one who insists on terms is often telling you something about their cash position.
• Mid-size orders (roughly USD 50,000–200,000). Deposit plus a sight letter of credit or documents against payment (D/P at sight). The point is to weld two events together — payment and release of the title documents. No payment, no documents.
• Large or long-running accounts. Letters of credit as the default. If you agree to open terms, pair them with export credit insurance or a bank guarantee so the risk sits with an institution rather than on your balance sheet.

When is it safe to extend credit? Use a hard test: four to six consecutive orders paid on schedule, access to audited financial statements, and an insurer willing to approve a credit limit on that specific buyer. All three, or no terms. Start at 30 days and lengthen slowly. Granting terms because the relationship feels good is the single most common way Chinese exporters lose money in the Philippines.

Payment Methods for Philippine Buyers: Five Rails and Who They Actually Protect

Five rails cover almost every Philippine trade transaction: wire transfer, letter of credit, documentary collection, open account, and third-party platforms. The useful question about each is not the fee — it is who carries the risk.

• T/T wire transfer. Cheapest and most common, and it carries no guarantee whatsoever. It is a pipe that moves money. Its safety depends entirely on how much you have received at the moment you hand over documents. More on this below.
• Letter of credit. The issuing bank takes primary responsibility for payment, which is the strongest routine protection available on mid and large orders. The costs are real: bank charges and unforgiving document requirements. Soft clauses and discrepancies are the classic traps. Prefer a mainstream Philippine commercial bank as issuer, and have your own bank assess anything unfamiliar.
• Documentary collection (D/P and D/A). Banks forward documents; they do not guarantee payment. D/P is workable; D/A is open account wearing a suit — the buyer accepts a time draft, takes the goods, and your remedy afterward is litigation.
• Open account. The 30/60/90-day terms Philippine buyers will ask for on the first call. Only viable with credit insurance or factoring behind it.
• Third-party and platform rails. PayPal, Payoneer, cross-border payment providers and marketplace escrow work well for high-frequency small tickets, which matters if you sell through cross-border e-commerce channels in the Philippines. Fees are higher and freezes or chargebacks are a live risk, so keep large B2B invoices off these rails.

One warning: local Philippine e-wallets and instant transfer schemes are retail instruments with low per-transaction ceilings. Do not collect large B2B invoices through them. If you genuinely need to receive pesos onshore, the correct route is a corporate account — see opening a Philippine corporate bank account. For the mirror-image problem, see paying Philippine suppliers from China.

Is T/T Payment Safe in the Philippines? Timing Is the Variable, Not the Method

A T/T is safe when you receive it before shipping and unsecured when you receive it after. Once a wire credits your account it is effectively irreversible, which works in your favour. All the risk concentrates in the window where goods have left but money has not arrived.

Three failure modes recur:

• Fake remittance slips. A buyer sends a PDF payment confirmation and asks you to release documents. Those files are trivial to edit. The only confirmation that counts is your own bank telling you funds have credited, or your bank tracing the MT103. Releasing an original bill of lading on the strength of a screenshot is a donation.
• Intermediary bank deductions. USD payments routed through correspondent banks lose fees at each hop and land short. Specify in the contract who bears charges (OUR / SHA / BEN) or you will argue about it on every order.
• The buyer's own FX and compliance checks. Philippine banks require supporting documents — invoice, contract, import paperwork — before releasing foreign currency abroad. An incomplete file delays a payment by days. Build that buffer into your due dates instead of declaring default the morning after.

One scenario deserves its own paragraph: the cargo has landed in Manila and the buyer stalls on the balance. You still hold cards, provided the bill of lading is consigned to you or to order and the originals are in your hands — without them the goods cannot be released. Work the loss down in this order: refuse to release documents, then have your own customs broker confirm accruing demurrage and storage (see choosing a customs broker in the Philippines), then negotiate a discounted release or a resale to a local third party, and only last consider shipping the goods back. Decide within the first week — demurrage is what actually bankrupts these deals, not the unpaid invoice.

Four Checks Before You Ship: SEC, DTI, Tax Registration, and Eyes on the Ground

Philippine corporate records are public, and two or three days of work will tell you most of what you need to know. Skipping this step makes every other control theatrical.

• Confirm the entity exists. Corporations register with the Securities and Exchange Commission (SEC), and you can obtain registration documents, the list of directors and past financial statements. Sole proprietors register a business name with the Department of Trade and Industry (DTI). Very often the trading name on the buyer's email signature is not the registered entity. Contracts and invoices must name the entity that actually exists on the register, not a name that lives only on a business card.
• Check tax registration. Ask for the BIR certificate of registration and a sample of their official receipts or sales invoices. A properly run company produces these in an hour. Evasion here is itself the finding.
• Match the balance sheet to the order. A company with minimal paid-up capital and years of marginal profits placing an order several times its apparent scale, on credit, is a risk you can see in advance.
• Put eyes on the place. A warehouse, a storefront, a headcount — worth more than a hundred documents. If you cannot travel, commission a local visit, and while you are at it confirm whether the registered address is a virtual office.

One more cheap move: ask for two or three existing overseas suppliers as references and actually call them to ask whether payments arrive on time. A buyer comfortable giving references is usually comfortable being checked. Buyer vetting and on-the-ground verification can be handled locally by the Yixing market-entry team.

Seven Clauses That Must Be Nailed Down in the Contract

A contract is not primarily litigation ammunition — it is a way of making default expensive enough that nobody tries. Miss any of these seven and you have handed over an argument.

• Tie payment to documents, not to dates alone. Not “payment 30 days after shipment,” but “balance payable within X days against copy bill of lading; originals released upon receipt of funds.” Money and cargo control must bite on each other.
• Currency and who carries FX risk. Price in USD and state that peso depreciation is the buyer's problem. Otherwise every currency move becomes a request for a discount.
• Retention of title. Ownership passes only on full payment. It matters when you need to assert rights over goods already in the country.
• Late-payment interest and cost recovery. State the daily or monthly rate and that collection and legal costs fall on the defaulting party. Without it, chasing your own money comes out of your own pocket.
• Governing law and forum. Chinese or Singapore arbitration is preferable. If you must accept Philippine courts, accept the timeline that comes with them and price accordingly.
• Language and controlling text. English governs. Bilingual versions without a controlling clause create a second dispute inside the first.
• Validity of email and order confirmations. Name the authorised email addresses of both sides and state that correspondence between them constitutes valid notice, so your message trail is admissible rather than decorative.

Also state the Incoterms rule and named place in full — the two-letter abbreviation alone is not a term. For dispute mechanics see handling contract disputes with Philippine companies.

When a Philippine Customer Will Not Pay: Four Steps, and Litigation Is the Last One

Do not open with a lawsuit. Escalate through four steps — most receivables come back at the first two.

• Step one: structural pressure. Stop further shipments, freeze documents in transit, and get a signed reconciliation of the outstanding amount. Then get a written repayment schedule with instalments and stated consequences. That document is both leverage and evidence.
• Step two: a formal demand letter from a Philippine lawyer. This carries far more weight than emails from you, because it signals that the next step is a courtroom. A meaningful share of slow payers settle here. On engaging counsel, see hiring a lawyer in the Philippines as a foreigner.
• Step three: small claims. Philippine courts run a small-claims procedure that does not require lawyers to appear and moves far faster than ordinary civil litigation — well suited to modest balances. There is a monetary ceiling, and it has been raised several times in recent years; confirm the current threshold against the Supreme Court's prevailing rules.
• Step four: ordinary civil action or arbitration. Measured in years and expensive. Justified only when the amount is large and the debtor has attachable assets worth pursuing.

Two special routes are worth knowing. First, bounced cheques: the Philippines has dedicated legislation on worthless cheques (widely known as BP 22 / the Bouncing Checks Law), and if the buyer paid by local cheque that later bounced, the escalation path and the pressure it generates differ entirely from an ordinary debt. Second, barangay conciliation, the compulsory community-level mediation step — it mainly applies between individuals in the same locality and rarely fits a cross-border company-to-company invoice, but the mechanism is explained in how barangay mediation works.

See also: Filipino Clients Don't Use WeChat; Letters of Credit With Philippine Buyers.

Move the Risk Off Your Books: Credit Insurance, Factoring, and a Local Entity

If the Philippines is a long-term market and credit terms are unavoidable, stop asking how to prevent losses and start asking who else can carry them.

• Short-term export credit insurance. Chinese exporters can insure receivables; the insurer sets a credit limit per buyer and indemnifies an agreed share on non-payment or insolvency. The underwriting is a second benefit: an insurer refusing to approve a limit on your buyer is the most valuable warning you will get all year. Premiums vary by country and tenor — take current quotes from the underwriter.
• Bank guarantees and standby letters of credit. The buyer's bank stands behind the obligation and the buyer pays for it. Sensible on large recurring accounts.
• Factoring and receivables finance. Sell the invoice for early cash; non-recourse factoring also transfers the credit risk, at the cost of the discount rate.
• Setting up a Philippine entity. An onshore company lets you invoice and collect in pesos and issue local official receipts, which is close to mandatory when selling to government or large corporates. The price is a full compliance load: tax registration, VAT, withholding tax and annual filings. Whether it pays depends on whether Philippine revenue is a long-term line of business. For repatriating funds afterwards, see sending money from the Philippines back to China.

A closing reality check: no structure guarantees payment. What good structure does is convert a likely large loss into an unlikely small one. To set terms for a specific buyer before you confirm the order, walk the order value, the requested tenor and the buyer's documents through with the Yixing market-entry team.