basic-guide-to-exporting_Latest_eg_main_086196

Chapter 14Methods ofPaymentIn this chapter . . .• Different ways to receive payment when youare selling products internationally• Selection of a payment method• Foreign exchange risk and payment problemsPrudent Credit PracticesExperienced exporters extend credit cautiously. They evaluate new customers with care andcontinuously monitor existing accounts. You may wisely decide to decline a customer’s requestfor open-account credit if the risk is too great, and you may propose instead payment-on-deliveryterms through a documentary sight draft or an irrevocable confirmed letter of credit—or evenpayment in advance. For a fully creditworthy overseas customer, however, you may decide toallow a month or two for payment or perhaps even to extend open-account terms.Other good credit practices include being aware of any unfavorable changes in your customers’payment patterns, refraining from going beyond normal commercial terms, and consulting withyour international banker on how to cope with unusual circumstances or in difficult overseasmarkets. It is always advisable to check a buyer’s credit (even if the safest payment methods areused). A U.S. Commercial Service International Company Profile (ICP) provides useful informationfor credit checks (see Chapter 6). For a fee, you may request an ICP on companies in manycountries. The ICP contains financial background on the company and gives not only its size,capitalization, and years in business, but also such additional pertinent information as the namesof other U.S. companies that conduct business with the company in question. You can thencontact those U.S. companies to find out about their payment experience with a givenforeign company.Because being paid in full and on time is of the utmost concern, the level of risk you are willingto assume in extending credit in global markets is a major consideration. There are several waysin which you can receive payment for products sold abroad; your choice will depend on howtrustworthy you consider the buyer to be. With domestic sales, if the buyer has good credit, salesU.S. Commercial Service • A Basic Guide to Exporting157