Top payment tips for small business exporters

These tips were provided to Bytestart by HSBC.

1. Blindly extending credit

Many exporters underestimate the risks of extending credit to overseas customers. They are less likely to know the companies or their reputations and they could find it difficult to obtain financial data on them. Exporters should consider protecting or insuring themselves against the risk of default by customers.

2. Underestimating language barriers

Granting open account credit is often essential to gaining orders, but how do companies get buyers to pay? Just because an English speaking person orders the goods doesn’t necessarily mean they will be available in the bought ledger department. Working with a third party that speaks the local language and understands ways of doing things can be a great way of granting a reasonable credit period but avoiding customers’ unreasonable delays.

3. Ignoring local customs

Understanding the culture of the country, including the un-stated business rules, can make all the difference between getting an order and failing. Do not underestimate the differences in culture even in Europe and North America, where the differences are subtler. It’s better to get current advice from people who have been there recently or specialists such as the Centre for International Briefing. Be ‘trained’ not ‘untrained’.

4. Not keeping proper records

Steps taken at the beginning of a business relationship will prevent problems arising, but also help resolve problems quickly and easily when they do occur. Businesses should ensure that the whole order/invoice cycle is properly documented, so there is clear evidence of what terms are agreed with suppliers and customers and that any conflicting terms are resolved. Businesses should get into detailed discussions with customers about terms and payment processes early on. It’s also worth investing in good legal advice to ensure their interests are protected and that all parties can reasonably fulfil conditions.

5. Keeping to your own currency

It’s not uncommon for foreign customers to think that a price quoted in sterling is un-competitive, even when it’s not. Assess whether customers are considering the cost and risk of dealing in a foreign currency to them? It might be better to quote prices in the buyer’s own currency. Exporters may be put off by the currency risk of selling in the buyer’s currency. There are, however, more ways than ever for the exporter to manage that risk cost effectively and thus ensure their terms appear at their competitive best.

6. Being inflexible over finance

Exporters have to balance the interest of the buyer with their own. The more risk the seller takes on the easier it is for the buyer to purchase. Find the right financial partner and those risks can be managed and shared to maximise sales at an acceptable risk.