Setting Export Credit Policies For Your Company

Selling abroad is not the sole domain of the large organisations, there are opportunities for everyone. It is possible to sell any type of goods or services into all foreign markets, so what’s stopping you? Of course sales and marketing methods will be different, as will the documentation and the way you will be paid.

Export credit managers have an obligation to work with your sales, marketing and other personnel to prevent disputes arising. Having to resolve differences over extended distances with possible language problems will delay payment for far longer than at home. Assessing credit risk is not only restricted to your customers – unstable currency and volatile governments must also be part of your calculations. However, do not be put off: help is available to small and medium sized exporters from many sources as you will discover.

Establishing an Export Credit & Marketing Policy

When seeking to export your goods or services a combined policy is called for; trading terms vary from country to country, so making sure the correct documents are completed is vital to successful exporting. Having a single credit and marketing policy will ensure that:

•             the right terms, conditions and prices are quoted in all sales literature
•             you will be using the correct methods of payment
•             the sale does not contravene the laws of the importing country

Making business decisions on reliable marketing and financial intelligence, using the sources online and below becomes imperative with export orders:

•             chambers of commerce
•             UK government departments
•             credit insurers, and factors
•             bank reports
•             foreign embassies trade attaches

Orders from overseas

When processing orders for export, irrespective of their source, coherent conditions of sale must be conveyed to your customers in order to eliminate disputes. You should confirm all orders in writing, and state:

•             exact terms of payment
•             penalties for late payment
•             any increased cost clause should commodity prices rise between order and delivery
•             who is responsible for changes in currency exchange rates — buyer or seller
•             when ownership of goods changes hands

Avoiding any foreseeable delay in payment by confirming these details in advance will reduce the cost of exporting, and enhance customer relationships by removing any cause for complaint.

In cases of dispute

Stating within your conditions of sale how any dispute will be dealt with and imposing time limits, will help you get paid, in part at least, should a query arise. You should also confirm what course of action is open to the buyer should agreement over a dispute not be reached between you: for example, arbitration by the International Chamber of Commerce.

Collecting and sales

A good export credit manager relies on the co-operation of your export sales department and local overseas representation whenever possible.

Sales can be generated by using an export agent who should also be involved with collections. Embassies and trade fairs are helpful when obtaining orders, but are of little use when collecting payment from abroad. Appointing one or two main distributors in each country will eliminate chasing a number of smaller accounts. Distributors and agents need to be able to supply you with reliable economic reports on both markets and currency conditions.

Exporting phrases

Knowing the rules which define your obligations as an exporter and those of the importer will assist you to avoid account queries.

Pre-stipulated delivery terms decide who is responsible for insuring the shipment, and when ownership of the products changes hands. For example the term FAS means you are responsible for the consignment of the goods up to the time they reach the dockside, at which point the buyer has ownership and liability. In some instances the carrier can be held responsible for insurance during the time the goods are in his keeping. EXW means your customer is responsible for the cargo immediately it leaves your premises.

Invoices

All invoiced prices must be based on the above terms, and can be in either currency and/or language. In addition to stating the details of your customer they are also required to show:

•             weights
•             measurements
•             packaging details
•             customs declarations

Some countries require invoices to be certified by an independent body, such as a chamber of commerce. This confirms they are correct in every detail. While this may delay shipping slightly it does assist you to get your goods through customs more quickly, and speed up the payment.

Leslie work for Gilmour & Co an accountants just outside Glasgow.