Whether you are collecting payment on a business transaction from a customer across the street or a client who is 12,000 miles away, learning how to collect payment on an overseas sales transaction is the single most critical yet insanely overlooked detail for small to medium sized business owners who aspire to do business internationally.Why? Because the excitement for sales folks typically lies in striking the deal — not in determining how you get paid.Here we outline several methods to collect payments on export sales during turbulent times. Anita: You are welcome. LC is a “safe” way of getting paid, but it could be tricky to get it right. Laurel has given us a great tutorial on this issue.As an experienced purchaser, I reflect on how you could use the terms of payment in your negotiation with the other party. It is important to put things on the table and discuss this issue. Have you thought that you are sending out a signal on how much you trust the other party if you want to get paid in advance, compared with giving days of credit?
Next time you are following up on past due accounts, consider the following ways you can collect payment without damaging your customer relationships. Set a payment policy. Make sure you set a policy of how to handle each customer (if the relationships vary), or you could set a policy that applies to everyone, no matter what.
The LC could be a solution of this dilemma. The terms of payment is also a cross-cultural issue and a way of different traditions regarding money transactions. Thank you for featuring Anita! And I agree with your response to Martin on the trust factor.Robert on handling millions of dollars in international trade payments, you didn’t say whether it’s exporting or importing.
If it’s exporting from the U.S.A., Ex-Im Bank can assist. I am a firm believer in handling transactions direct through your own international bank for both control and minimizing transaction costs.Keith can you give us an idea of the size of your transactions and what the exact transaction costs are on your deals? And on a yearly basis, are your fees minimal or enough to support another person to assist in the international area of your business?
Laurel, thanks for this great article. I would like to bring couple of points into your and readers consideration in my comment. My first point is that, in order to be get paid under a letter of credit, you should make a complying presentation. Banks have no responsibility paying a non-complying documents. So it is crucial for the exporters to understand the terms and conditions of the credit before shipment of the goods.
My second point is the confirmation. If you are working with a high risk country, please consider having a confirmation from your bank to the credit to overcome various uncertainties.