Export provides opportunity to push our boat further. However a company must take care so as not to sink.
Except for procedural problems and extended duties of employees from the accounting, one must take into account that a company will get money considerably later than in case of a domestic customer, even assuming that the money will be sent on due date stated in the invoice. Additionally, in case of delays in payments, it may take very long for a company to receive money for its goods.
Why does it take so long? Firstly, what really matters is the physical distance the goods are dispatched to and customs clearance. The goods reach their destination later and the recipient checks it later, accepts it also late and then confirms the delivery. Secondly, companies in the country we export goods to may face more difficult situation than in our own. Thirdly, payment practices binding in this country may cause problems for us. The said practices are determined by many factors. First of all, by an overall culture of conducting business in a given country, and the result of its facilitation or hindering by state authorities. For instance – in countries with precise legal regulations, and restricted bureaucracy, it is easier for companies to manage their finances and we can expect to receive money sooner form them. Where simple matters cannot be handled easily, but sink in the bureaucratic mess, simple actions may become problematic. Extreme examples of these two approaches may be, e.g. Germany and Italy.
Various payment practices cause not only misunderstandings in case of delays (when it is a problem for us to wait 120 days for payment, while for our customer it is a standard period), but also may cause problems even as early as during contract negotiation. German customers may accept rigorous terms of transactions, whereas an Italian company may withdraw from the contract.
How to reconcile these requirements? An optimum solution may be export factoring. An exporter will get the money for the delivered goods at once and the customer form a foreign country will be able to settle its liability on convenient terms. Good factoring companies and banks also offer broadly understood counselling services in the scope of local laws and help to complete the transaction successfully. They also have local branches, which will help them to control companies operating on foreign markets. They often offer other financial liquidity management services and, when need arises, they are able to recover debts from the company that delays with payments.
Published on: 14 November 2016