Exporting and getting paid! What are the options?

Exporting and getting paid! If you a relatively new to exporting or are currently exporting and want to export a lot more, most likely one of your major concerns is getting paid for the goods you export. Of course taking legal action to obtain payment in another country is likely to be much more complicated and expensive than taking such action in your own country so it pays to make every effort to ensure that payment is made as per agreement.

First of all, when you enter into negotiation for the export sale of your goods do as much online research as possible to find on information on the company and individuals you are dealing with. There are now multiple source of such information which make a good starting point to ensure you are dealing with professional and trustworthy people.

If initial internet research finds no serious negative information and the deal is progressing it may be time to use an import/export inspections company. Such a company will be able to produce a Company Verification Report on the organization that you are proposing to deal with. This can be done if you are exporting or importing. More information on such reports can be found in this article:

https://blackcat360.com/import-checks-why-they-are-vital/

Now you have five options on how you may ask to be paid.

Exporting and getting paid, there are 5 options:

• Upfront payment
• Letters of credit
• Documentary collections
• Open account
• Consignment

Exporting and getting paid – Upfront payment

With upfront payment the exporter can remove the risk of late or non-payment as the goods or services are paid for in advance. Wire transfers and even credit cards can be used to make the payment. From the exporters point of view this option is the best from both a risk and cash flow point of view. For the importer though payment upfront poses considerable risk as goods may not be delivered or be sub- standard, so this will be a difficult option for an exporter to negotiate especially for a first contract or order.

Exporting and getting paid – Letter of credit

Exporting and getting paid by using letter of credit. Letters of credit are a commitment by a bank on behalf of the foreign buyer that payment will be made to the exporter provided the terms and conditions stated in the L/C have been met, as evidenced by the presentation of specified documents.

Letters of credit are a frequently used method for exporting and one which offers a level of protection to both buyer and seller. As the seller it is vitally important that the terms and wording of the letter of credit are checked thoroughly as the payment will only be made if the terms of the letter of credit are fulfilled even if the goods have been delivered.

Use your own bank to organize the letter of credit. Consider if you need to use your own bank as a confirming bank who will guarantee the payment in the event of default by the importers bank.

This article goes into some detail on how to use letters of credit:

https://www.shippingsolutions.com/blog/methods-of-payment-in-international-trade-letters-of-credit

Exporting and getting paid! Documentary collection

With documentary collection, your bank will control your product until payment is made. Your bank sends documents to the importer’s bank along with instructions for payment. The funds are received from the importer and remitted to you in exchange for the documents.

exporting and getting paid

Exporting and getting paid! Open account

Open account means that the importer will pay for the goods only after they are received and normally on 30, 60 or 90 days after delivery. Of course this is rather risky for the exporter but the option that many importers will push for during negotiations.

Exporting and getting paid! Consignment

With consignment, payment for the goods is only made to the exporter once the importer has sold them on. As exporter this is high risk and should be avoided unless dealing with an importer that you have a long term successful relationship with.

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Exporting and getting paid