First Steps to Exporting

4. Getting Paid

4.1 Discuss your cash position with your bank manager before exporting.

• The possible time lag between shipment of goods and payment affects your cashflow.
• When arranging your sales, ensure payment terms are defined. Use the internationally recognised rules, Incoterms 2000. Visit the International Chamber of Commerce website.

4.2 Minimise foreign currency risks.

• If you sell in local currency, exchange-rate fluctuations between the date you agree a sale price and the date your customer pays can mean you receive less than expected.
• Although trading in sterling transfers the risk to your customer, this can make you uncompetitive in the market.
• You can protect against exchange risk using foreign exchange contracts an currency options. Ask your bank for advice.

4.3 Explore ways of extending credit.

• Before giving credit to new customers assess their creditworthiness through an application process.
• Minimise the risks of late payment from new customers by initially granting a low credit limit. Take into account that this may restrict your sales growth.
• Credit payment terms vary across the world. Foreign firms often insist on large discounts for early settlement.
• Structured trade finance, such as bridging loans, can plug the cashflow shortfall while you await payment. Carefully consider the risks of bridging finance. If your customer does not pay, can you afford to shoulder the burden of non-payment?

4.4 You'll probably be selling your products to a wholesaler, but if you are selling direct to the consumer of your product use a factoring company to help collect debts.

• Factors are expert in the techniques of international debt collection.
• High street banks offer factoring services but they do not operate in every country. For a small fee they will pay around 80 per cent of the value of your invoices.
• Factors assume responsibility for collecting remaining monies.

4.5 Purchase trade credit insurance to cover yourself against non-payment.

• Commercial insurers can help with credit insurance. Contact the British Insurance Brokers' Association on 0901 814 0015.
• Your bank can offer advice on insurance.