06: Doing business overseas

When doing business overseas, it is even more essential that you agree payment terms with customers and adopt rigorous credit control procedures, because taking legal action to recover unpaid invoices may be exorbitantly expensive or impossible.

In addition to assessing the credit risks associated with particular customers, you will need to understand the risks of the particular country and market you are considering doing business in. Once you’ve considered the overall risk, you can then decide on the optimum payment terms, which include:

• Payment in advance – taking at least some payment up front.
• Letter of credit – which the customer arranges with their bank.
• Documentary collection – payment when your customer accepts ownership of the goods.
• Open account – similar to offering credit to a UK customer, this should only be used with established customers.