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Getting paid: 4 tips for exporters

Getting paid: four tips for exporters

Exporting provides many opportunities, but the risks of non-payment from buyers can be serious. John Brown, an International Finance Specialist at Scottish Development International, shares four tips on how preparation and research can help ensure you'll get paid.

If you're an SME exporter, you might not have the resources to protect yourself if a buyer doesn’t pay. Ensure you’re prepared by doing plenty of research into your buyers and the different methods of payment available.

John Brown, International Finance Specialist, Scottish Development International

John Brown, Scottish Development International

There's no doubt that exporting provides many opportunities for businesses. But it also has commercial and financial risks if you're a seller. This is particularly true for SME exporters, who may not have the financial strength to cope if a buyer doesn't pay.

Four tips to make sure you get paid

1. Make payment a priority

What's the most critical consideration for sellers of any size when you agree a commercial transaction? Is it dispatching your goods? Getting your customs documentation correct? Incoterms? A follow up call with your buyer? 

All these things are hugely important steps, but ensuring you get paid should also be very close to the top of your list of priorities.

Like any good plan, preparation and research are the foundations for a successful outcome - with diligence at the centre of it.

2. Research your buyer

Diligence on who your buyer is, is an absolute must. I recommend you approach one of the many credit reference agencies, such as Dun & Bradstreet or Experian, who'll provide you with a comprehensive report on your buyers across a range of headings. This will include previous payment history and details of any court action taken against them.

It's worth mentioning that these reports are only as good as the level and quality of information available in that market. You should also consider undertaking basic desktop research, or if you have an agent in country, they may be able to offer some support.

It's always worth understanding the political and economic stability of the country your buyer is based in, particularly when looking at entering developing or challenging markets. These situations can change rapidly and, in the case of sanctions, without notice.

To add an additional level of comfort, have a look at the World Bank’s ease of doing business index.

3. Consider credit terms

When operating in new markets, you'll most likely need to offer longer credit terms than you would do in your domestic market, particularly where there is strong domestic competition. This can have a negative impact on your cash flow, so the type of payment method you negotiate is important to minimise any risk of non-payment.

4. Think about payment methods

Having the ability to offer and accept different methods of payment can help you to be paid on time, in full and mitigate against non-payment. The following list gives you a guide on what payment method you could consider, based on some common exporting situations. 

  • Customer relationship is new – cash or letter of credit
  • Customer relationship is established – collection or open account
  • It’s a custom-made order – cash or letter of credit
  • It’s a normal/standard order – collection or open account
  • Political situation is stable – collection or open account
  • Political situation is unstable – cash or letter of credit
  • Economic situation is stable – collection or open account
  • Economic situation is unstable – cash or letter of credit
  • Competitors offer terms – collection or open account
  • No competitors offering terms – cash or letter of credit
  • Risk of price changes – cash or letter of credit
  • No risk of price changes – collection or open account
  • You need to control cash flow – cash or letter of credit
  • You don’t need to control cash flow – collection or open account

Find out more

Watch our video where John Brown explains more about ensuring you get paid as an exporter.

You can read more about understanding payment methods in our guide on Export finance and risk

Find out about payment options for international markets in our guide on Finance for exports.

Contact us

Got any questions about getting paid as an exporter? Our team are here to help.