Export Finance — Pre & Post Shipment

Export houses run on bank finance: packing credit (PCFC) before the goods ship, and post-shipment finance against the invoice while the buyer's payment is in transit. Exim models both as submittable documents that post the bank Journal Entries for you and keep the loan ledger straight.

Pre Shipment (PCFC)

A Pre Shipment is a packing-credit drawdown in foreign currency (typically USD) against a specific Sales Order, Sales Invoice, or Contract Term — or as a running account with no specific document.

Filling it in:

1. Against + Document — what the loan finances (or tick Running).
2. Credit currency & loan amount — e.g. USD 50,000 out of the order's USD 88,750.
3. Banks & accounts — funding bank (Indian), the Loan Account (a bank-type account in the loan currency) and the Loan Credit Account (where the INR lands).
4. Forwards — optionally split the drawdown across open forward contracts; whatever isn't covered by forwards is the cash amount at the spot cash rate. The document's exchange rate is the weighted average of forward and cash rates, and the split must reconcile to the loan amount exactly.
5. Bank loan reference — the bank's PCFC reference; required to submit.

On submit, a Bank Entry JV posts (credit loan account in USD, debit the INR credit account), the utilized forwards get utilization rows, and the loan shows as Outstanding.

Post Shipment

After shipment, the bank converts packing credit into post-shipment finance (e.g. foreign bill purchase). The Post Shipment document draws the new loan and repays Pre Shipments in the same movement:

• The Repayments table lists the Pre Shipments being squared off — each row carries the pre-shipment's outstanding, its loan account, and the amount repaid.
• The JV credits the post-shipment loan account and debits each repaid pre-shipment's loan account; any un-applied difference lands in the loan credit account.
• Each repaid Pre Shipment gets a repayment row and its status advances (Outstanding → Partially Paid → Paid).
• Like Pre Shipment, it can utilize forward contracts for the conversion.

The full finance chain

flowchart LR
    SO["Sales Order<br/>USD 88,750"] --> PRE["Pre Shipment PCFC<br/>USD 50,000 drawn<br/>status: Outstanding"]
    PRE -->|"JV: Cr PCFC loan a/c<br/>Dr bank INR"| GL1[("GL")]
    SI["Sales Invoice<br/>shipped"] --> POST["Post Shipment<br/>USD 50,000 drawn"]
    POST -->|"repays"| PRE2["Pre Shipment<br/>status: Paid"]
    POST -->|"JV: Cr Post-shipment a/c<br/>Dr PCFC loan a/c"| GL2[("GL")]
    PE["Customer payment<br/>arrives"] -.->|"squares off post-shipment<br/>finance at the bank"| POST

Loan statuses at a glance:

Cancelling a Pre or Post Shipment reverses its JV and removes its forward-utilization and repayment rows — the chain unwinds cleanly.

Currency note: the loan documents insist the sums reconcile — forwards utilized + cash = loan amount, repayment ≤ outstanding — and refuse to submit otherwise. If you see "The sum of Total Amount Utilized and Cash Amount must be same as Loan Amount", adjust the forward split or the cash amount; the math has to close.