Magazine article Business Credit

Improving Your Collections of Foreign Receivables

Magazine article Business Credit

Improving Your Collections of Foreign Receivables

Article excerpt

Increase your overseas sales! Dealing with Discrepancies! Get Paid Quicker! We have all been through these seminars - and often walked away confused and bewildered. Exporters who are simply looking for ways to ship a product and get paid for it get barraged with a myriad of trade terms that each require its own seminar.

Having been on both sides of the podium, I am constantly looking for ways to provide exporters with tangible ways of improving the collection of their foreign receivables. After watching a popular Saturday morning home improvement television program, I was struck by the similarities between a homeowner and an exporter. During a typical renovation, the program host walks the homeowner through the project and explains how to approach the various aspects of the remodeling. A term that the program host uses frequently is "sweat equity". This term refers to how much effort needs to be put forth by the homeowner to save time and money. A successful remodeling project is always accomplished through the partnership of the homeowner and the program host that coordinates the project.

Get Your Bank Involved

Because of the complexity inherent in international trade, it is also a good idea for the exporter to get their bank involved at the very beginning of the transaction. This partnership between the exporter and the bank is essential because the bank will be collecting the foreign receivable. A certain amount of sweat equity on the exporter's part is needed to research and understand the risks associated with each transaction. Trust and risk are the two words that drive a good international sales plan. There is no magic formula. Knowing where and to whom you are selling will determine how much risk is involved in the transaction and the level of trust you must have with your customer. Another key element of an international sales plan, and one that is often overlooked, is payment terms. Payment terms are negotiable, and asking for a letter of credit may not always be the best approach. Actually, asking for a letter of credit from a foreign entity that traditionally sells on open terms may cause an exporter to lose the sale. Many exporters feel that it is in their best interest to ask for a confirmed irrevocable letter of credit, which is fine if the terms and conditions of the letter of credit are also spelled out in the sales contract and all parties involved in the transaction know exactly which documents are needed to facilitate payment.

Watch Out for Discrepancies

An exporter may think that asking for a confirmed irrevocable letter of credit protects them against non-payment. …

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