Methods of Entry, Export /Import Financing

Finance trade depicts trade financing which concerns international and the domestic transactions. International sales permit a number of payments which is either by credit or debit depending on the sellers choice. Some of the basic payments methods include credit letters, advance credit, consignments, documentary collections and open accounts. The most commonly preferred methods are wire transfer and advance payments based on the convenience that is created while checks payments may tend to be problematic due to payments delays or check bouncing. However, due to the differences held by the methods in reference to flaws the validity of the transaction should be determined prior to release goods. In addition, consumers will in most cases settle for companies that offer flexible and more secure modes of payment. While utilizing written payment strategies such as documentary collection and credit letters all the terms should be stated properly and specific amounts indicated (MSU, N.D).

It is true that an International Company Profile (ICP) is one of the best strategies that can be utilized in determine the foreign buyer’s credit to avoid inconveniences and fraud (MSU, N.D). Consignments in international sales are particularly risky because one is not guaranteed of receiving payment and the goods are usually placed on an independent agent’s hands (MSU, N.D). However, this method can help the exporters in acquiring competitiveness due to increased goods availability. In addition, this method lowers the general cost of operation since storage and the management of inventory is conducted by the agent. In this case, exporters should focus on partnering with trustworthy as well as reputable distributors.

One of the primary risks that are involved in foreign trade is based on the future rates of exchange uncertainty. In foreign trading, the payment is usually made using the currency of the buyer or an agreed currency by the traders. Since the currency can depreciate prior to the deal conclusion based on the stipulated period this implies that if the seller does not have adequate protection from such fluctuations they can incur losses. This is because the payment will arrive lower than anticipated and the appreciated may offer benefits. One of the best strategies that the seller can avoid risks is through quoting prices which mean that the risks and the associated burden being placed on the buyer when the payment option is quoted to be the U.S dollar (MSU, N.D). This is, however, a risky approach because it may result in the loss of exporting opportunities and lack of payments particularly for the buyers who feels that they may not meet the currency requirement. Prior to making sales negotiation after a consumer has requested to make payments in a certain currency one should consult the bank for advice regarding the involved risks. Avoiding debts issues is less easy as compared to trying to solve them based on the market’s complexity.

Debt conflict can best be resolved through attempting to negotiate and remain into contact with the clients while exercising patient since some technical issues must occur thus retaining consumers. However, if the strategy fails legal counsels can be consulted and if this fails arbitration which is less formal may be utilized (MSU, N.D). Currency risks and fluctuations shape different strategies for acquiring payments from different consumers abroad by helping an organization in deciding on the best strategy to use. Payments transactions can be acquired using credit letter that is effective in protecting the sellers as well as the buyers.

 

            References

MSU. (N.d). Methods of Payment. Michigan State University, International Business Center. Retrieved from https://globaledge.msu.edu/content/onlinecoursemodules/67/methods-of-payment/player.html