On page 311 of your text book, you are introduced to the concept of a “letter of credit.” A letter of credit is often used in international business transactions to help insure payment. Here is a link from the U.S. Export-Import Bank that takes you through the steps in a letter of credit: www.exim.gov/smallbusiness/moreinfo/Letter-of-Credit-vs-Open-Account.cfm (Links to an external site.) (right click, new tab).
With the advent of digital technology, increasingly, even small businesses are becoming global in scope. If you had a sale transaction for $1M, would you utilize a letter of credit? What if you knew the customer and were satisfied with their credit? Would you consider selling product on “open account”? Does your answer depend on where you might be shipping your products?