- Negotiate favourable payment terms
An upfront deposit, interim payments, or a lesser payment period are some of the payment terms which are evidently beneficial to exporters. So, too, is giving out payment in advance, though majority of the importers would not agree to such a biased condition. Besides, a letter of credit or documentary collection are not just thought out to be secure bets but they are also low-risk choices for both the buyer and seller. No matter what the payment terms, an exporter needs to ensure that they are clearly spelled out in the agreement so that there is no space for any sort of confusion later on.
- Be ready for currency risks
A changing currency can mean that you end up receiving less than what you had expected. To avoid such a scenario, you can easily ask to be paid a) in a steady currency, or b) at the current exchange rate when you obtain payment at a future date. On the other hand, you can try to persuade the importer to pay you in your resident currency. This is the favoured option for most exporters. Though, there is an advantage to billing an importer in his own currency, particularly if you do a lot of business with that specific buyer. According to research, the foreign buyers, in China for instance, set forth a currency risk fee while paying exporters in US dollars. An exporter needs to consider all these factors. By joining export import course in Mumbai and learning right export procedures, you will be making more money and reduce risks.
- Make a cashflow forecast
Make a cashflow forecast for the period from when you obtain an order up to the time you anticipate to be paid for it. To make such a prediction, you will require some information, such as your business expenditures, money inflows and balance sheets. A forecast is supportive since it shows if you have the resources to keep your business running for the whole business time. It also recognizes periods when you will have more currency flowing out than in. You can then prepare in advance for any sort of eventualities.
- Get professional advice
Even when you are doing your homework on an agreement meticulously, you might miss out on an unseen problem. If it is a lawful issue, it will be next to impossible to get a proper solution in a foreign land with different laws. Keep a lawyer with knowledge of international transactions and build your contract to evade currency risks and legal annoyances down the line. There are legal, accounting, foreign exchange and professional advisers who can offer you with applicable information on international trade compliances, rules and regulations, customs laws, tax compliances, licence requirements, just to name a few. With their guidance, you can easily lower your risk of non-payment and evade a cashflow crisis.
- Emphasis on creditworthiness
Most exporters depend on borrowed funds to keep their working capital smoothly going. However, financiers will not lend to an exporter who lacks creditworthiness. To make certain your business has a sound credit rating, you ought to have a well thought out export strategy and an effective and see-through accounting system. Financiers will be keener to lend to you if you have robust ties with reputed accounting and financial advisers as well. At the same time, it is likewise significant to check your buyers’ creditworthiness.