Managing your credit risk
One of the primary concerns when it comes to overseas trading is leaving your business open to the risk of non-payment.
With proper planning, you can manage your credit risk effectively.
Know who you're doing business with
Running checks on the creditworthiness of potential customers and suppliers allows you to assess their likelihood of paying and eliminate those whose history suggests they may pose a risk.
International business reports can give you detailed summaries that include information on a company's credit status, risk score, historic payment performance, public record information and more – providing you with the knowledge you need to best choose your business associates abroad.
Subscribers to Barclays Business Abroad get a 40% discount on international business reporting services provided by Experian.
Choose a payment method that suits you
There are several ways of accepting payments from your foreign associates. Especially when embarking on new business relations with customers abroad, you'll want to make sure you choose a payment option that gives you peace of mind.
- Payment in advance You'll receive full payment for your products or services prior to providing them to the customer. There is no risk involved in this method of payment, but not all customers will want to pay you in advance all of the time
- Letters of Credit These are a sort of contract between your bank and/or your foreign associate's bank. Payments will be made so long as all documents submitted to the bank(s) are compliant with the Letter of Credit's conditions
- Other payment methods Read our article How to get paid when you do business abroad
There are 2 types of Letter of Credit. For any given transaction, 1 of these letters can be used to outline the conditions of the sale to give assurance to both you and your customer.
Export Letter of Credit
This can help to reduce the risk of you not getting paid when sending your products abroad. Quite simply, the importer's bank will pay you as long as you meet the terms of the Letter of Credit. This has the extra bonus of helping you manage your cashflow, as you'll know the exact payment date.
Import Letter of Credit
Just as you may prefer a payment guarantee when you're exporting your products to countries abroad, if you're an importer some of your suppliers may insist on being paid with an Import Letter of Credit before exporting their product to you.
Payment is made when your supplier presents the documents you specify in the Letter of Credit. You agree an amount with us and we'll take care of the rest from helping you decide what documents to ask for to the terms of the Letter of Credit.
