International Trade payments – a look at the risks and options, by AFR Director Simon Speak
At our recent North West Finance Director Network event in Lancashire, Joseph Cave from Barclays bank discussed payment options available when trading on an International scale and the pros and cons of these methods.There is a lot to consider when entering this new realm of trading, and each different country and even transaction needs to be looked at individually, and judged job by job to get the best outcome all round.
There are different risks that can present themselves with both buying and selling overseas, for example the political situation and currency of the country you’re trading with need to be continually monitored and assessed.In many cases, one of the safest methods of payment is using banks as intermediaries; banks such as Barclays have a global presence and have different methods of payment which they can help with depending on the nature of your proposed transactions.
The main payment types when trading internationally are;
- Bank guarantees
- Bills of exchange
- Documentary collections
- Letters of credit
- Bankers drafts
- Swift transfers
- Advance payments
- Open accounts
- Customs – it is not just about transporting goods between countries but what happens to those goods when they arrive. Customs can be a very complex process, helped massively by ensuring that your goods and payment terms all have the right documentation.
- Documents – all documents relating to transactions need to be 100% accurate, any discrepancies, even down to a different spelling of the company name can cause hold ups - which often prove to be lengthy and complex to deal with.