Pricing and getting paid : An introduction
Lesley Batchelor OBE is an expert on international trade and a passionate champion of UK exporters. She is Director General of the Institute of Export, the professional membership body for everyone involved in international trade.
Getting paid is the only reason we do business! This section is vital to your understanding of how to set a price, linking you with some of the considerations you need to take into account such as taxes, freight costs, insurances and modifications that impact on the final price you can charge. All must be considered in the price that is finally quoted to the customer including a validity period, production and shipping and credit terms.
And before you begin you must also to take into account that it may cost you money to collect the international payments, not just because of foreign exchange can be unpredictable, but also because each payment method has its pros and cons, and most importantly a cost!!
Taking into account the market trends as far as price elasticity, negotiation style, credit terms and acceptable methods of trust – getting paid can be fraught with problems unless you’ve got some expert help.
In this section of Open to Export we’ve asked experts to talk you, as a small business, through the differing bank products and accepted processes that are used internationally.
There are only a few main methods or terms that can be used. These range from ‘I trust this customer completely’, trading on open account terms to ‘I don’t know this customer or country at all’ and must seek the security of a letter of credit.
In all financial circumstances the more you know about your customer the better the chances of using the right payment method, setting the right price and, of course, getting paid.