Because of its simple form and circulation characteristics, bills are protected by laws of all countries, and therefore play an important role in economic life.
1) Circulation function
As a payment tool, bills can reduce the use of cash. Bills can be transferred from the previous hand to the next hand after endorsement, and can be endorsed and transferred multiple times. Endorsement has a guarantee function. The more endorsers, the stronger the guarantee of the bill. Therefore, bills can be widely circulated in the market, becoming an important circulation tool and expanding the means of market circulation.
2) Exchange function
Bills can replace currency to be transported between different places, facilitating payments between different places, and are safer and more convenient than transporting or carrying cash. In contemporary international settlements, non-cash settlement methods have replaced cash settlements. Under non-cash settlement conditions, certain payment tools must be used to settle the creditor-debtor relationship between two parties in different countries, and bills are such a payment tool.
3) Credit function
The bill itself is not a commodity and has no intrinsic value. It is a written payment voucher based on credit. The drawer makes a written payment credit guarantee on the bill, and the payee or acceptor promises to fulfill the payment obligation in accordance with the provisions of the bill. For example, in a transaction of a certain commodity, if the buyer agrees to pay at a certain time after receiving the goods, the buyer can issue a promissory note, which represents the credit of the buyer to pay at that time.
4) Settlement function (debt offset function)
The creditor-debtor relationship caused by various economic transactions in the world can be offset by bills. For example, Merchant A of Country A purchased goods worth 10,000 US dollars from Merchant B of Country B, and Merchant B of Country B purchased goods worth 10,000 US dollars from Merchant C of Country A at the same time. At this time, the bill of exchange can be used as a tool to offset the debt, thereby avoiding the double trouble of Merchant A of Country A remitting 10,000 US dollars to Merchant B of Country B, and Merchant B of Country B remitting 10,000 US dollars to Merchant C of Country A. That is to say, at this time, Merchant B in Country B can issue a bill of exchange of US$10,000 with Merchant A in Country A as the payee and Merchant C in Country A as the payee to Merchant C in Country A, so that the latter can directly claim compensation from Merchant A in his own country with this bill of exchange. It can be seen that if bills can be properly used as a tool for payment and offsetting debts, the cost of international settlement and the trouble of settlement can be effectively reduced.
5) Financing function
Financing means that the holder can discount and rediscount the unexpired forward bills, and sell the bills (usually to banks) after paying a certain discount interest, thereby obtaining cash. In addition, the holder can also mortgage the bills to the bank for pledge loan financing. The financing function of bills is achieved through the discount, rediscount and rediscount of bills.