08 Jul Collecting International Payments For Exports
Exporting can be extremely beneficial for a company’s bottom line, however, according to a fact sheet provided by trade.gov, less than one percent of America’s 30 million companies export. And of the 1% who do, 58% of them only do so to one country leaving vast untapped export potential. The main reasons cited for choosing not to explore global markets all deal with fear and uncertainty. It may be anxiety provoking for a business to engage in international sales; the company may think they aren’t set up to handle the demands of shipping internationally, maintaining a website in multiple languages, and collecting international payments.
We know McPherson County’s industry has a significant dependence on exporting activity. We are the 2nd most export-intensive county in our region surpassed only by Sedgwick County. We learned from data provided by the Brookings company that roughly 2,157 of McPherson County’s 4,300 manufacturing jobs are supported by exporting and the 23.4% of MP County’s entire economy is tied to exports! You can see that our prosperity is dependent upon our exporters, however, most of those who we talk to consider themselves new to exporting or ‘unintentional exporters’ i.e. exporting without a well-defined strategic plan. The great news is there are resources available for businesses who want to forge new international relationships and grow their business and in turn our local economy!
In partnership with Kansas Global Trade Services, the McPherson Industrial Development Company continued their lunch and learn series on the topic of international exporting with a presentation given by Sarah Braden, International Trade Supervisor at Intrust Bank. Sarah began her career in the International Department more than ten years ago. While starting as the International Wire Clerk, she presently focuses on international trade practice and policy. She serves on the Friends University – Master of Global Leadership and Management Program Advisory Board and is a member of the World Trade Council of Wichita.
The goal of Braden’s presentation was aimed at calming one of the most commonly stated reasons for not doing business internationally; that fear being the risks around collecting payment. In her presentation, Braden covered four different payment methods exporters can use to collect their money for goods/services provided to the international buyer. Those options are Cash-In-Advance, Open Account, Documentary Collection, and Letter of Credit.
To determine which would be the best method to use Braden suggested that companies look at each case individually:
- Identify the risks that are associated with the transaction: look at Country Risk, Economic Risk, Credit Risk and Operational Risk
- Quantify what the company’s appetite for risk actually is and also what the costs are for risk mitigation
- Justify-Will the cost of prudence leave any room for profit?
Attendees left the program knowing they had different options for payment collection and also knowing when they may want to consider the different options depending on the risk level associated with the transaction.
This session was the 3rd of 5 scheduled learning opportunities designed to increase the savviness of McPherson’s industrial employers in international exporting. Back in January, MIDC and Kansas Global offered a program designed to help McPherson businesses learn more about the resources available to help develop and execute a well-designed exporting plan. Attendees learned just how profitable a well designed, and a well-executed plan could be to businesses and, in turn, our local economy (read more). Last month attendees learned about Incoterms; what they are, practical applications of these terms and also received suggestions/best practices for use. These terms are meant to provide clear and concise communications between buyers and sellers; knowing how to use them properly can provide a clear strategic advantage and significantly reduce the company’s risk (read more).
The McPherson Industrial Development Company typically hosts a monthly “lunch & learn” on the first Wednesday of the month as a part of their industrial business retention program. The next program will cover considerations when selling to different cultures and feature Emmanuel Ngomsi, Ph.D., Corporate Trainer, and Award Winning Educator as our presenter (read full bio here). This event is scheduled to be August 3rd, 2016. More information on this program and the opportunity to RSVP will be sent out in July’s MIDC newsletter or you can RSVP here today.