Risks involved in international transactions
- Delays in payment or non-payment
- Loss or damage in transit
- Loss due to exchange rate variations
- Increased transportation costs
The best way to reduce financial risk when exporting is to arrange prepayment of invoices. A customer signs a sales contract and makes payment upfront. The Australian business receives the money so there is no risk of non-payment later on. The exporter could require customers to pay the full price or a large deposit. Australian banks offer international money transfers. Electronic payments are sent from a branch via Internet banking from Australia to banks in other countries.
Non-payment of monies
A financial risk is not receiving payment from the customer after incurring costs and possibly providing the goods or service. Unlike a domestic transaction, it may be very difficult to track down a customer that hasn’t paid in another country and difficult to find legal recourse to recover the debt.
- Documentation to manage risk
- Documentary letter of credit
- Documents against payment
- Export Credit Insurance
- Political Risks Insurance
- Transit or Shipping Insurance