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International trade should bring mutual gains

Talk to your banker about it

Bruce Atkinson – International trade should-Bruce Atkinson Web

To succeed in today’s global marketplace, exporters must offer their customers attractive sales terms supported by the appropriate payment method to win sales against foreign competitors.

As getting paid in full and on time is the primary goals for each export sale, an appropriate payment method must be chosen carefully to minimise the payment risk while also accommodating the needs of the buyer.

As the diagram here illustrates, there are four primary methods of payment for international transactions. During or before contract negotiations, it is advisable to consider which method is mutually desirable for you and your customer.

International trade should-Payment Risk Diagram WEb

 

Key Points

International trade presents a spectrum of risk, causing uncertainty over the timing of payments between the exporter (seller) and importer (foreign buyer)

To exporters, any sale is a gift until payment is received

Therefore, the exporter wants payment as soon as possible, preferably as soon as an order is placed or before the goods are sent to the importer

To importers, any payment is a donation until the goods are received

BNZTherefore, the importer wants to receive the goods as soon as possible, but to delay payment as long as possible, preferably until after the goods are resold to generate enough income to make payments to the exporter

If you are in the business of exporting, you need to manage the risk of dealing with trade and foreign exchange. Our Foreign Currency Accounts, International Payment Options and Trade Finance can all help.

Bruce Atkinson is Trade Specialist at BNZ Title Sponsor of the Indian Newslink Indian Business Awards 2016 and Indian Newslink Sir Anand Satyanand Lecture. He can be contacted on (09) 5243912. Email: bruce_atkinson@bnz.co.nz;

Website: www.bnz.co.nz

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