A website inquiry arrives at the small company that just hired you. The potential customer asks about the possibility of a sizeable shipment, one that would allow your company to make its sales goal for the month. However, the potential customer is located abroad and you have never completed an international sale. Your boss asks you to outline your recommendations for handling this order, particularly how to manage the payment.
You already realize many differences exist between international and domestic orders. You also have heard stories from former colleagues about the problems and issues in international sales. From what you have heard, possible concerns include:
- A lack of legal recourse in case of default.
- Difficulty determining credit information about companies outside your country of residence.
- Misunderstandings and language barriers between customers and suppliers.
- Macroeconomic risks.
Yet this lucrative deal could be good for your company and good for your status if you get it right. You begin to research your options and discover that your company could obtain payment by one of seven methods, including:
- Cash in advance.
- An open account.
- A letter of credit.
- Documentary collection.
- A procurement card.
- A proprietary system such as TradeCard or Bolero.
- A bank guarantee.
In addition, you may obtain credit insurance to help guarantee payment if the customer defaults.
However, you try not to become overly excited because several of these possibilities may require involvement from both your company’s and the customer’s bank, both of which could charge sizable fees to handle such payments that might destroy your profit margin. You decide to examine the pros and cons of each method as it relates to your company’s operations, compile it in a report, and present it to your boss to make an informed decision.
Do you think you should pursue the sale? What method of payment would you choose? The Accenture Academy course Introduction to International Payment Methods highlights and discusses the main differences between domestic and international payment methods and outlines their advantages and disadvantages to help you benefit from international sales while mitigating the risks your company may face.