Business owners have to think globally in order to be competitive in business. In today’s world, it is essential to think about safe and favourable payment methods while selling products internationally. In my personal opinion, you have to ensure that it is favourable for both the seller and the buyer. The risk arises in international trade because an importer’s natural mindset is to receive goods before payment, and an exporter is to get paid before dispatching the goods. This is the reason why a reliable payment mode is essential. The five types of payment methods are:
1. Letter of Credit
2. Open Account Terms
3. Cash in Advance
4. Consignment and Trade Finance
5. Documentary Collection
If you are an exporter, a vital consideration in international trade is the payment mode. Relying on upfront cash will eliminate the risk of non-payment. But it will also limit potential customers as buyers will have an issue with their cash flow. I have learnt that you analyze your customer and then offer five basic payment methods while making international trade. From an exporter’s point of view, the most to least secure payment modes include cash in advance, letter of credit, documentary draft or collection, open account and trade finance. However, an exporter’s safe payment method is always the least safe for an importer.