Export credit insurance helps companies remain competitive by offering open terms when letters of credit or prepayment may have previously been the only safe way to do business. In fact, foreign companies buy an average of 40 percent more when they are offered open terms, according to the World Trade Organization. Sales can also be protected from political risks, including import/export changes and foreign government intervention.

Few companies can effectively compete without extending credit to their buyers. For companies that sell on an export basis, export credit insurance levels the global playing field.

Working with new countries means dealing with new cultures, rules and regulations to follow but they also offer the opportunity to access new markets and customers. Businesses must know export credit insurance and how to manage the associated credit risks that come with exporting products or services.

Research Potential Export Credit Risks

Doing your research means identifying the main risks linked to export in that country. This could include risks of non-payment, foreign exchange risk or political risk. Find out the specifics for the country of export as many have very specific export/import requirements. You may also encounter bribery and corruption in some countries. Export credit insurance helps you to be prepared of these risks and to deal with them. Being prepared for these risks makes a big difference when trying to recover payment. You can refer to Allianz Trade country reports and collection profiles to help you in this research.

Doing your research also means finding reliable information to check your customers. Get up to date information to balance the need for increasing sales but getting paid. Keep in mind that legal obligations and access to information are not the same everywhere.

Ensure Your Export Contract Paperwork is Accurate

If you haven’t done so already, get your terms and conditions checked by a lawyer who has export and import experience to avoid potential risks, such as harsh late delivery penalties, onerous indemnity clauses and clauses related to the transfer of intellectual property. To minimize disputes and litigation, contracts should include all essential terms and include a clause that mentions if payment is delayed past the due date, the buyer is liable for third party collection costs incurred, late payment interest and legal charges. Contracts should also be clearly written with unambiguous language and specify the law that governs the agreement.

Ensure that your terms and conditions are in hard copy at some stage. These could be printed off by the buyer and signed and dated. It’s much better to do this before the order is placed, just like ticking terms and conditions when placing an online order.

Maximize Your Chance to Secure Payment

Make sure you understand the local legal procedures and linguistic aspects to anticipate non-payment. Know how to conduct an out of court negotiation. You can also use Allianz Trade debt collection services with our global network of offices and contacts.

Build Long-Term Relationships

In many countries, a commitment to building long-term personal relationships is vital for your project to get off the ground and succeed. It can take significant time to build trust and understanding so get started as soon as you can. Being flexible can also help build lasting relationships. Be ready to adapt to your market entry plan and products as you proceed with export credit insurance. Good relationships with local partners will help you get the feedback you need to hone your efforts.

Vet Partners Carefully

Do thorough due diligence on partners, acquisition targets and other companies you hope to deal with. It’s vital to investigate a potential strategic partner’s reputation and financial health. Make a list of criteria they must meet and be disciplined about sticking to it. Businesses sometimes get caught up in the excitement of a venture and make the mistake of making a deal with a company that isn’t a good strategic fit because, for example, the financial terms are attractive. Your partners should understand your business goals and share your values.

Be Patient and Persistent

Don’t expect quick sales, much less quick profits. As your expansion progresses, keep learning, tweaking your efforts and getting better. If you encounter difficulties, remind yourself that it’s common for a company’s first foreign venture to stumble.

It can take two to five years to recoup your investment, depending on the country. Make sure you monitor your progress and what’s going on in your markets to stay ahead of changes and update your planning as needed.

Explore Related Resources

Credit management is defined as your company’s action plan to guard against late payments or defaults by your customers. An effective credit management plan uses a continuous, proactive process of identifying risks, evaluating their potential for loss and strategically guarding against the inherent risks of extending credit. Having a credit management plan helps protect your business’s cash flow, optimizes performance and reduces the possibility that a default will adversely impact your business. 
No two businesses are alike. That’s why your business needs a credit management plan tailored to its needs, industry and customers. That said, experts agree that effective credit risk management best practices include optimizing contract management and accounts receivable collections, identifying and analyzing the account receivable risk of new clients defaulting on payments and creating a proactive credit risk mitigation plan.