There are four main transaction types for overseas customers.
|Payment in advance||This involves taking payment before dispatching goods and means you bear no risks or financing costs. You might use it when you have concerns about a customer's ability to pay. However you should be aware that very few trade customers will agree to pay in advance.|
Known as letters of credit, this is one of the safest ways to get paid by overseas customers. Your customer arranges a letter of credit with their bank, which pays a bank in the UK once you complete the necessary paperwork, the goods have arrived at their destination city, and the documents are accepted without any discrepancies.
In this system, payment becomes due when your customer accepts ownership of your goods. You instruct your bank to draw up a bill of exchange, which allows you to keep control of your goods. An overseas bank, acting for your bank, will release the documents allowing your customer to take the goods once they accept the terms of the bill.
This is similar to offering credit to a UK customer. You supply the goods and invoice the customer, stating when you expect to receive payment.
Choosing your payment options
Consider your customer's creditworthiness, trading conditions in your customer's country and your business' financial strength. Ensure you research overseas customers' and markets' creditworthiness and consider how to assess the risk level for overseas payments.
You should also consider currency choice and payment methods.