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Payment risks

Manage and mitigate the risks of importing and exporting

Advice and support

Payment solution risks explained

Both importers and exporters have a mutual interest in transactions being successful, however respective interests in relation to the payment terms are very different. Good payment terms to the exporter may mean poor payment terms to the importer, or vice versa. This can be clearly seen in the risk ladder diagram below. Therefore, it is important to understand the options before agreeing your sales contract.

 

Open Account
Most transactions - whether within the UK, or internationally, are carried out via 'Open Account'. The exporter ships the goods with an invoice and awaits the payment from the importer. In this scenario, there is no guarantee of payment on time or even at all. The importer has a clear advantage.

Documentary collection or 'collections'
These come in two varieties - 'term' and 'sight'. Briefly, the importer's and exporter's banks act as agents in the transaction. They handle and coordinate payment and exchange of documents - like a solicitor handling a UK house purchase. 'Term' means the parties have agreed that the importer will pay at a later date. 'Sight' means the importer is to pay immediately on receiving the goods. While a collection offers a little more protection for the exporter, the importer's ability to choose when he/she pays is more limited.

Letters of credit
Additional protection when doing business overseas. The importer's bank guarantees payment by the importer. This product requires the importer to organise a credit facility
(subject to status). An L/C offers exporters security and may also give the importer terms to negotiate a better overall deal price. Letters of credit can also be confirmed at an additional cost, which means that in the event that a payment cannot be made due to general economic or political instability in the importer's country, the payment is still guaranteed, but by the exporter's bank.

Cash in advance
This means that the exporter receives the payment for goods before they have been shipped. In this situation the importer trusts that the seller will honour the contract and deliver the goods on time and as specified.

Manage and mitigate payment risks

Reduce your import trade risks. Give your supplier assurance that you’ll do what you say. Our range of trade services could provide valuable trading confidence.

 

Documentary collections

A secure, simple and efficient method of collecting payment for the goods you export.

More on documentary collections

Letters of credit

Cover your trade risk, with a guarantee of payment before you commit to sending goods.

More on letters of credit

Guarantees and bonds

Give your customers confidence that you’ll meet your contractual export obligations.

More on guarantees and bonds

Regulations that deal with risk

Understanding your responsibilities in international trade can be a challenge. The industry-­wide standards and terms can be confusing. Familiarising yourself with the basics could help your business run more smoothly when trading across borders.

More on regulatory information

Get in touch

 

New customers

To discuss your unique banking needs, please call SolutionsLine on:

0800 210 0235
Text Relay 18001 0800 210 0235
Mon to Fri 8am-5.30pm (excl. public holidays)
Calls may be recorded.

Existing customers

Please contact your relationship manager.

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