Posted on 25 May 2016
Building a successful export process is like using a set of interconnecting building blocks. It includes researching markets, building relationships, and understanding the local sales environment - all of this is critical to collecting 100 per cent of your sales proceeds. Key issues to getting paid from overseas buyers:
BUYER CREDIT CHECKS
The main credit agencies provide credit reports on overseas buyers. Alternatively, ask for a bank reference or a secure form of payment such as a Letter of Credit, which is a bank guarantee of payment. The main credit agencies provide credit reports on overseas buyers. Alternatively, ask for a bank reference or a secured payment method such as a “Letter of Credit” which is an internationally recognised form of secured bank trade payment.
KNOW YOUR PREFERRED PAYMENT TERMS
Take account of extended international shipping and goods clearance times
if payment is linked to delivery, seek down payments or ask to be paid upon completion at a certain stage, such as delivery of goods to the port of export. Avoid payment on delivery to the buyer’s country.
MATCH PAYMENT TERMS
Ensure payment terms are linked to Incoterms, the International Chamber of Commerce terms of trade.
RESTRICT PAYMENTS TO CERTAIN TYPES
Seek immediate electronic cash payment such as bank transfer or e-commerce via PayPal or an online card payment. Avoid paper settlement such as cheques.
EXPORT CREDIT INSURANCE
To protect against non-payment and political issues in the buyer’s country. Even if you don’t insure in the UK, it is highly advisable to protect against non-payment and political issues in the buyer’s country
CURRENCY OF PAYMENT
Regular exporters should consider currency bank accounts to improve managing regular foreign cash receipts.
CHECK LOCAL TAXATION
Goods and services exported to certain countries could be liable to mandatory withholding tax deduction by local authorities upon payment of the sales invoice.
Agents and distributor contracts which award sales commission should always be contingent on your receipt of payment and require the local representative to help collect payments as part of their agreement.
Colin Evans, Chief Commercial Officer at Think Global Growth explains:
“The best advice is to maintain a strong sense of risk when exporting to international markets. Generally speaking, importers want to receive goods as soon as possible but then delay payment as long as possible, preferably until after the goods are resold in order to pay the exporter.
“The exporter, on the other hand, wants to generate working capital to fund new business which clearly demonstrates why taking control of the payment process is critical to export success!”
Colin Evans is a senior corporate treasurer, banker and debt/cash management professional with more than 30 years experience in global banking and corporate treasury. His areas of expertise include corporate bank treasury and cash management, international financing and debt structures, M&A advisory, international trade finance, treasury systems, processes and procedures. Colin has worked with clients across Europe, the USA, Middle East Africa and Asia Pacific and has considerable project leadership and commercial experience across a spectrum of domestic and global organisations. firstname.lastname@example.org
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