If you’re planning to expand your business by trading internationally, you’ll want to know you are going to get paid for the goods that you export and relying on cash payments isn’t always wise or possible.
Here a few important things to consider:
Open account
This type of payment process is best avoided if you are new to exporting. Essentially you as the seller/exporter send the goods to your buyer/customer and then they are given a set period of time to make payment once they receive the items. There’s a huge amount of risk involved and we wouldn’t recommend unless it’s a one off small value export or you have a trusted and established relationship with your buyer.
Bank collection
This is a slightly more secure process and as the term suggests involves getting your bank to send an instruction document to your buyer’s bank for payment of goods.
Letters of credit
Probably the most secure method of payment open to those trading internationally. It reduces risk of non-payment to the seller/exporter by providing a contractual agreement whereby the buyer/importer’s bank promises to make payment to the exporter once they can evidence that the goods have been shipped. This method should result in your business being paid on time and therefore avoid any cashflow issues.
Advance payment
As the name suggests, your buyer has to pay for the goods before you go to the trouble and risk of shipping of them. Consumers fulfil this kind of transaction every day when they’re buying online. It’s the most secure and advantageous for exporters particularly if your customer is new, your buyer doesn’t have the best credit rating or you sell high value or rare items.
Need more info? Give our friendly team a call on 01952 270699 or email sales@global-freight.co.uk for more tailored advice.
