In business, risk and reward are two sides of the same coin, and that’s especially true when exporting. But while you can’t avoid all risk, you can minimise it and be prepared for it.
At Coface, we have been helping companies manage their trading risks for 75 years, and we can provide cover in more than 200 countries. All that experience and expertise is at your fingertips as soon as you become a Coface credit insurance policyholder. As a taster, here are our seven essential tips for managing your credit risk when exporting.
1. Dig deeper than websites and directories
At very least, you require the full name, home address, and business address of the company director you are dealing with. Always be aware that unscrupulous people can create the illusion of a reputable business very easily. Find out if the country has official registration of businesses, the equivalent of UK Companies House, and use it if possible.
2. Don’t believe references
The chances of ever being provided with a negative trade or bank reference are astonishingly small. If anyone has had a bad experience dealing with the company in question, this is not how you’ll find out about it.
3. Ask the awkward question
Be thorough in every possible way. Insist on seeing the latest company accounts. Ask for evidence that the company is trading profitably and not in debt. There will only be a problem if they’ve got something to hide.
4. Don’t necessarily worry if the company is using a factor
More and more firms use a factor or invoice discounter to secure their finance nowadays, so it isn’t necessarily a bad sign.
5. Trust evidence, not instinct
Even when your gut feeling is that a new customer is trustworthy, only be satisfied by hard evidence. That’s why the authoritative and up-to-date credit reports Coface can provide on 80 million companies worldwide are such a key resource.
6. Don’t hesitate to ask for an upfront payment
The time to decide about providing a company with credit terms or a credit limit is after they have paid on time, not before.
7. An increased credit limit is a reward, not a right
You need more proof of creditworthiness than just one or two prompt payments before extending a customer’s credit limit.
The clear conclusion for exporters is that the key to successful credit management is accurate and up-to-date information. The more you know about your trading partners, the lower the risk of dealing with them. As a Coface Credit Insurance customer, you have free and immediate access to our unrivalled market intelligence—company credit reports, sector reports, country reports, political risk assessments, economic evaluation, etc.—constantly updated and always authoritative. You know more, so you can grow more.