Your first export – what to do when an overseas customer calls
Your first order from an overseas customer has come in (congratulations, by the way), you’re keen to do business, but unsure of your next move. What to do? The following is a complete guide that’ll help you successfully navigate the early days of international business. Good luck!
1. Watch out for additional costs
Export costs: If you accept online payments it’s possible an order from overseas will have been paid for by the time you notice it. “That’s fine,” says Teresa Baffa, Barclays International and Trade Manager. “But you still need to cover yourself for other costs even though the customer has paid up front. Send an email straight away setting out any extra dispatch costs and making clear that the customer is liable for any import duties at their end.”
Exchange rate risk: Unless your buyer pays you the full asking price in sterling (and some exporters do insist on this) the amount of money you’ll receive could go up or down in response to movements in the exchange rate. Work out what this means for you with our Exchange Rate Risk interactive online tool.
2. Make sure you get paid
Credit checks: If credit is asked for, you don’t have to make a leap of faith. Instead, check whether your customer is creditworthy using Experian’s detailed financial reports (available to Barclays Business Abroad subscribers at a 40% discount). [Link to landing page of Barclays Business Abroad] Also, take a look at your new customer’s website, if they have one, and run a general web search to get a feel for who they are and how they run their business. The more you know about them at the outset the better.
Payment terms: “If an overseas customer places an order but hasn’t paid – and their credit check isn’t up to scratch – insist on full payment (by credit card, online via a third party or bank transfer) or a letter of credit,” says Teresa Baffa. Read more on the payment options when you sell overseas.
Cash flow: It is likely that the longer transit times and different accounting practices that can apply when trading in foreign markets will mean it takes longer to get paid. For most first-time, one-off exporters, this shouldn’t be a show stopper, but how you feel about cash flow will of course depend on the size of the order in relation to your business’ turnover.
3. Cover off legal and tax
Local regulations: You may need a licence before you can sell, or send, your product or service abroad. “Local laws, regulations, product liabilities, labelling and a host of other variables come into play when you export your product or service,” says Teresa Baffa. To get up to speed on this subject read Business Link’s useful guide or contact your local Chamber of Commerce or relevant trade association to connect with similar businesses who can share first-hand experience.
Contracts: If you feel a bespoke contract needs to be drawn up, talk to a commercial lawyer specialising in international trade. The Law Society has a searchable database of commercial lawyers and an initial phone consultation is free.
Intellectual property (IP): For a one-off first sale most exporters are happy to take a calculated risk on IP, but if you’re concerned talk to the Chartered Institute of Patent Attorneys or the Institute of Trademark Attorneys for advice.
VAT: Generally you should charge VAT to EU consumers (if your goods are VATable) but non-EU customers, including those in the US, don’t usually get charged. Check with the HMRC VAT Helpline on 0845 010 9000.
4. Ship the product
Buyer and seller responsibilities: Export documents are a vital component of the international trade process. Make sure your products have the documentation they need to successfully reach their destination by using the export document preparation services from Acorn Interactive that are available – at a 25% discount – when you subscribe to Barclays Business Abroad.
The logistics of selling overseas mean you must also cover yourself legally for the things that can go wrong while goods are in transit. International Commerce Terms (Incoterms) can help on this as they set out who’s responsible for things like transport costs, insurance, duties payable and customs clearance. (Business Link has more on Incoterms.)
Logistics: A small one-off order for an easily packaged product can be shipped (and tracked by the receiver) with any internationally recognised carrier such as UPS, Fedex or DHL. If your product is very large, hazardous, or perishable – or you start to export regularly – you’ll need to know more about freight logistics. The British International Freight Association can help.
5. Go for it!
The rewards: “There are extra costs involved with exporting,” says Teresa Baffa, “but UKTI research shows that companies who do make the leap into foreign trading are more likely to be faster growing, more resilient and more profitable in the long run.” The key is to go in with your eyes open. “Learn as much as you can from that first accidental order and then you have a solid base to expand from,” she says. “Don’t be daunted, work your way through the learning process and get good systems in place from the start. It’s not as complicated as many business owners think and the rewards can be huge.”
International Chamber of Commerce © 2012 International Chamber of Commerce. Source: www.iccwbo.org
Commercial lawyer database © 2012 Law Society. Source: www.lawsociety.org
Chartered Institute of Patent Attorneys © Chartered Institute of Patent Attorneys. Source: www.cipa.org.uk
The Institute of Trademark Attorneys © 2012 ITMA. Source: www.itma.org.uk
British International Freight Association © BIFA 2012. Source: www.bifa.org
Most business owners land their first overseas order entirely by accident,” says Teresa Baffa, International and Trade Manager at Barclays, “but whether it happens by design or default, exporting is a potentially very profitable path that’s well worth exploring.