In the role of an exporter, the primary business focus is on selling your goods and getting paid for those sales. But how does an exporter implement payments terms for such sales.
Any exporter needs to consider factors when putting in place payment terms with their customer. They include, but are not limited to:
Value of the transaction.
Your relationship with your customer, new or long-standing.
The country where the goods are destined.
The buyer’s country’s rules about how money will be released to you, the seller.
Whether the product being shipped is customised, built to a specific need or is available off the shelf (also referred to as a vanilla product).
Understanding the export risk
Any exporter will benefit from regularly assessing their customers and understanding the political, credit and foreign-exchange risks in place as this will help define payment terms that would be best suited.
What are export payment terms
It is important to understand the risk and exposure an exporter will encounter. In some cases, the risks are clearly visible, but in others scenarios the risks are difficult to understand such a financial regulations in the customers country for where the goods are due to be shipped. As a result, it is important to understand any controls and ensure in it reflected in an commercial and payment documents.
Here are some commonly used payment options used by exporters and importers around the world.
Open Account qualified by the phrase "net 30-days from international bill of lading date."
Open Account qualified by the phrase "net 30 days from international bill of lading date" backed by a standby letter of credit (SBLC).
Time Draft containing a statement identifying a date when the seller will be paid such as "30 Days from International Bill of Lading Date." This is also known as a documentary collection under a time draft.
Sight Draft containing a statement "at sight." This is also known as a documentary collection.
Documentary Letters of Credit either Unconfirmed or Confirmed.
Cash In Advance.
The key for any exporter is to choose the term that is right for your business especially with any risks that might be identified. Part of any assessment will be to review the various payment options your company will offers your customers.
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