How do you manage payment terms with export buyers?

From my experience the best way to manage the payment terms in import is according to the customers payment terms so there will be no "black hole " in the incoming outcoming capital. If it is not possible , the importer should be able to find the capital inside his company or through financing companies to bridge the gap. In the export the preferable way is to receive the money as advance payment or as CAD , especially with new customer, that in order to minimize the risk of financial loss. In the export/import the currency exchange rate is really important so the finance manager should control the rates daily

Cash in advance mode of payment use when Exporter feel insecure to provide goods or services to foreign buyers based on their credit worthiness. Normally, Exporter when begins business with a new foreign buyer, run credit report to ensure that it's feasible to offer credit to this buyer. If credit report gives poor rating then its preferable to do business in Cash in advance. Cash in advance certainly gives sense of security if buyer agrees to carry on this term. Now when to take it. The best terms are 30 % at the time of receiving PO, 40 % at the completion of order & 30 % with goods ship with BL. This mode of payment totally at the discretion of Expoter to discontinue this term when they establish good relationship with Buyer.

Understand International Payment Methods: Familiarize yourself with international payment methods, such as Letters of Credit (LC), Documentary Collections, Open Accounts, and Advance Payment. Each method has its own advantages and risks, so choose the one that suits your business and risk tolerance. Negotiate Payment Terms: Engage in open and transparent negotiations with your export buyers. Discuss and agree upon the payment method, currency, payment schedule, and any associated fees. Be clear about when and how payments will be made.

Use Letters of Credit (LC): LCs are a secure payment method where a bank guarantees payment to the seller upon presentation of specified documents. This method provides a high level of security for both parties.

Open account contract is alternate to Letter of credit which foreign buyer use to avoid LC charges ( Commission, Telex , Postage Courier, discrepancy charges etc ). It is not secure as LC be, where bank provide assurance to Exporter that Importer cannot break contract when there is Irrevocable clause. Importer usually prefer this type of contract when there is large volume to transaction involve in import.It indeed favors Importer over Exporter. However, exporters can have the opportunity to avoid LC charges as well. There is only $ 10 - $ 20 deduct by foreign buyer bank's when routing transaction through it. ( LC $ 250 ) Open account not pose strict cash flow paradigm to Importer, however Exporter need to be careful when offer it.

In tough markets with plenty of local competition it can be difficult to compete when adding another obstacle into the equation, that of currency exchange, a buyer when offered a local solution is more likely to choose that. But there are options out there for exporters, be proactive, work with a currency company that can offer forward contracts, fixed rates etc. giving you the option to offer your goods in the local currency whilst at the same time planning and mitigating any fluctuations in the currency markets by booking rates at the same time a buyer places an order. Because currency houses only deal with currency we have become specialised in finding solutions for those needing to find an advantage.