International Collections — Making Credit As Good As Cash Sales

International

Good collection policies and procedures can
bring in cash for international sales as effectively as cash deals.
That was the main message conveyed by Eddy Sumar, CCE, CICE,
International Trade Financing Manager, for Rain Bird Intl., Inc.,
during an FCIB audio teleconference, March 22, 2007.

Sumar’s
teleconference, "The Fundamentals of International Collections,"
explored basic techniques and tips on how to strategically focus a
company’s international collection efforts to maximize the extent and
timeliness of payments on credit sales. Credit sales, which are a
necessity in many cases in order to compete for business, do not have
to tie up a company’s cash flow as long as sound collection
fundamentals are planned and executed. "The objective is to turn the
receivable into cash," Sumar said. "No matter what we do, if the sales
don’t turn into cash, the company won’t exist very long."

There
are a number of factors that are key to good collections cited by
Sumar, such as those involved in forming good relationships with
customers. That relationship with the customer should involve all
segments of the company, not only in the credit department, but also in
the sales, marketing and customer service departments. "Everybody in
the company is involved in the collection process." If there is a
payment dispute, Sumar advised approaching the impasse very carefully
and diplomatically. "Never turn a dispute into a confrontation,
especially in an international sales. (The legal department) should be
the last resort of your collection effort. All you get is a big legal
fee."

Exercising due diligence, in terms of
investigating and evaluating the creditworthiness and character of a
customer is very important to getting paid on a timely basis. Assessing
risk in international sales also requires an assessment of country
risk. Also, every country presents a unique set of variables that must
be understood such as the culture of the citizens and the bureaucracy
of the government. On the subject of culture, Sumar noted that in
Germany, for example, if you called someone by their first name it
could be considered an insult. One credit strategy for new customers
suggested by Sumar is to start off with prepayments or letters of
credit sales then, if the circumstances warrant, shift to credit terms.

In terms of building successful customer
relationships, Sumar advised making personal customer visits and
building up a network of other organizations such as dealers and
collectors that can help. "FCIB could help you with a network," Sumar
said. "If you gain the respect of a customer, your chances of getting
paid are much greater," he added. Customers must also be educated on
the expectations of the credit department he pointed out. "Educate your
customer on your terms and conditions." He noted, for example, that if
a customer wants to be paid in 30 days, when that time period starts
needs to be clearly communicated, such as at the time of the invoice or
the date of shipment. Also, in terms of cash in advance he said, "Cash
in advance doesn’t mean a check. If a check is on foreign currency it’s
not immediate cash. When we talk about cash in advance, we need cash in
my bank."
  By Tom Diana, NACM Staff Writer

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