How to manage international payments

Trading overseas can be a minefield of currency fluctuations, legal complications and communication problems. This can lead to a breakdown in relationships with suppliers and distributors - and worse still, leave you out of pocked. You need to pay special attention to your overseas transactions if you want to stay ahead. This guide will help with:

  1. Payment terms
  2. Managing currency
  3. Insurance

1) Payment terms

Because UK law won't apply in many of your overseas transactions, it is important to limit your risks as much as possible to ensure you get paid. There are four main ways you can arrange payment: in advance, with a letter of credit, with a 'bill of exchange' once the goods are in the customer's hands, and by invoicing. To decide how to arrange payment, you should balance your risks against your customer's requirements and expectations.

  • Limit your risks as much as possible
  • Arrange payment in advance, with a letter of credit, with a bill of exchange or by invoicing
  • Balance your risks against your customer's expectations

2) Managing currency

Fluctuations in Sterling will affect how much you can afford to buy and sell when you draw up a contract with your overseas suppliers or distributors, as well as when you make or receive a payment. To make this more secure, speak to your bank or alternative currency provider about pre-booking or pre-purchasing currency at preferable rates.

  • Fluctuations in currency will affect how much you earn
  • Currency price will fluctuate between when you make a deal and when payment is due
  • Pre-book currency to secure your deal

3) Insurance

Insurance against non-payment by overseas customers will prevent a delayed or lost payment from having serious consequences. Make sure you factor cost of insurance into any pricing discussions because it could raise the cost of the goods for the buyer, and then decide whether you want to opt for commercially available insurance, or government-supported insurance.

  • Insurance will prevent late payment from restricting your cashflow
  • Factor the cost of insurance into your deal
  • Decide which type of insurance you want

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