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How to Get Paid for Your Export Sales

Published: March 27, 2013 Updated: April 1, 2013

Ultimately, any sale is a gift until you get paid.  However, understanding how to get paid for an export sale is especially important, since your buyer could be 10,000 miles away.  There are four common ways to get paid for an international order. From the most, to the least, secure method of payment for the exporter, these are:

1.     Cash-in-advance- New exporters frequently request this method. Their attitude typically is, “I don’t know you very well, but if you send me the money I’ll send you the goods.” 

  • Advantage: The exporter gets paid before the shipment leaves the U.S.
  • Buyer’s Perspective: It is high risk. The money is gone with only the exporter’s promise to deliver.
  • Drawback: It limits the exporter’s sales potential; is non-competitive; and ties up the importer’s cash.

2.     Letter-of-credit- Letters of credit (L/C) substitute the creditworthiness of the importer and exporter with that of their respective banks.

  • Advantage:  The exporter will be paid if the terms and conditions of the L/C are met.
  • Buyer’s Perspective: The funds won’t be released until shipment is made and terms are met.
  • Drawback: There are fees associated with opening and amending L/C; the importer’s cash is tied-up.

3.     Documentary collections- This method uses the banking system to send documents to the importer.

  • Advantage: The goods are not released until importer pays or agrees to pay.
  • Buyer’s perspective: Payment is delayed until goods are close to being delivered.
  • Drawback: No guaranty of payment; banks only act as intermediaries.

4.     Open account- Open account terms for international sales are similar to domestic open account sales. The buyer agrees to pay in a set number of days—typically 30, 60, or 90—from the invoice, shipment or delivery date.

  • Advantage: More competitive terms which can help secure larger orders.
  • Buyer’s perspective: May allow the buyer time to sell the goods prior to payment; does not tie up importer’s cash.
  • Drawback: The goods are gone and the buyer might not pay. This risk can be greatly reduced by obtaining credit insurance from the Export-Import Bank of the U.S. on the foreign accounts receivable. Cost can be minimal, viz. about 65 cents per $100 of the invoiced amount for a policy that provides 95% coverage. Visit www.exim.gov for details.

About the Author:

July 2, 2009 - Report of the Small Business Advocacy Review Panel on the OSHA Draft Proposed Standard for Occupational Exposure to Diacetyl and Food Flavorings Containing Diacetyl.

 

Demand ROI from Business Planning

By Tim Berry, Guest Blogger
Published: March 26, 2013

How do you value your business plan? What’s it worth to your business? Here’s how I do it:

  • I value the business plan by the decisions it causes.
  • I value a business plan by the money it generates.
  • I value a business plan by its results.

How do you value anything in business? For accounting purposes, expenses are negative value, and assets – things you buy, things you own, that aren’t expenses – are worth what you paid for them. But what’s the real value?

That’s where the phrase “return on investment” (ROI) comes in. Technically, ROI is the (return-investment)/investment. For example, the ROI of buying stock shares for $250 and selling them for $300 is (300-250)/250, which is 20%.

Please forget the formal financial definition, and consider this instead: every business expense—time, money, resources, reputation, and whatever—is an investment. What you get back is a return.

You don’t always get positive value back from what you do. Business meetings often cost more in wasted time than what they generate in information or business decisions. Many sales and marketing programs cost more than the dollars they generate.

So what about business planning? Here are some factors to consider:

  1. People often mistake the purpose of business planning as if it were to have a business plan document to help with raising money from banks or investors. That happens, but it’s a small subset of the real business planning that goes on.
  2. The investment in business planning can be measured (or estimated) as the sum of the management time invested, plus cost of consultants or writers or other outside help.
  3. The return on most of the best business planning investment is a matter of decisions made, performance improved, increased accountability and other aspects of better management. That’s because proper business planning sets goals, establishes responsibilities, and helps with focus and prioritizing key elements of the business.
  4. Sometimes the return on investment is insight. The people who develop the plan pull the business apart and see what makes the most difference, and what’s most important. Sometimes they see threats and flaws. Insight can be very valuable.
  5. When it comes to raising money via banks or investors, making a business plan document is part of the process. The plan doesn’t raise the money, but you can’t raise it without the plan. Effort in making it easy to read and understand often pays off in making the information easier to get to for the people who stand as gatekeepers. But they don’t invest in the plan. They invest in the company and the people that execute the plan.
  6. Some returns can be estimated as a negative. For example, the lack of planning means expensive surprises, lack of management priorities, lack of accountability, less-than-optimal reactive response to events, problems, and opportunities.

Taking the above into account, here are tips to optimize the return on investment in business planning:

  1. Do only what you’re going to use. Don’t spend business time on a document unless there’s a specific business purpose.
  2. Keep the plan streamlined, easy to build, easy to use.
  3. Understand that the plan is just the first step in planning. It will be obsolete in days or weeks. Set schedules for regular reviews and revisions. Track results. Use plan vs. actual analysis to manage better and optimize business performance.

Ultimately, business planning is about better business—not better documents.

About the Author:

Tim Berry
Tim Berry

Guest Blogger

Founder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 46 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including his latest, 'Lean Business Planning,' 2015, Motivational Press. Contents of that book are available for web browsing free at leanplan.com .

January 15, 2008 - Transmittal letter to Edwin G. Foulke, Jr., Assistant Secretary for Occupational Safety and Health, U.S. Department of Labor, Occupational Safety and Health Administration (OSHA) regarding the Report of the Small Business Advocacy Review Panel on the OSHA's draft standard Occupational Exposure to Beryllium.

August 9, 2010 - Final rule, Cranes and Derricks in Construction, published in the Federal Register

January 16, 2009 - Letter to Thomas M. Stohler, Acting Assistant Secretary of Labor for Occupational Safety and Health, concerning Proposed Cranes and Derricks in Construction Rule.

February 28, 2006 - Final rule, Occupational Exposure to Hexavalent Chromium, published in the Federal Register.

December 17, 2004 - Letter to John Henshaw, Assistant Secretary for Occupational Safety and Health, submitting comments in response to the OSHA's Notice of Proposed Rulemaking (NPRM) on Occupational Exposure to Hexavalent Chromium.

December 19, 2003 - Transmittal letter to John Henshaw, Assistant Secretary, for Occupational Safety and Health, U.S. Department of Labor, Occupational Safety and Health Administration (OSHA) .regarding the Report of the Small Business Advocacy Review Panel on OSHA's draft proposal for Occupational Exposure to Crystalline Silica.

January 9, 2006 - Letter to Honorable Jonathan L. Snare, Acting Assistant Secretary of Labor, OSHA, comments on Proposed Electric Power Generation, Transmission, and Distribution; Electrical Protective Equipment Rule

June 15, 2005 - Proposed Rule, Electric Power Generation, Transmission, and Distribution; Electrical Protective Equipment, published in the Federal Register.

November 28, 2007 - Proposed rule, Confined Spaces in Construction, published in the Federal Register.

November 24, 2003 - Transmittal letter to John Henshaw, Assistant Secretary, for Occupational Safety and Health, U.S. Department of Labor, Occupational Safety and Health Administration regarding the Report of the Small Business Advocacy Review Panel on the OSHA's draft proposal for Confined Spaces in Construction.

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