We discussed the benefits of the sale and examined some of the logistical details. Since he understood many of the twists and turns, he surprised me when he posed a basic question: "If we put the sale together, how will we get paid?"
Stunned and taken aback, I asked, "What do you mean, 'How will we get paid?' I would assume the buyer and seller have already agreed to the payment terms."
He replied, "I don’t know all the arrangements made by management. My basic question is: Will they pay us in pesos or dollars? Will the payment arrive by a check or a wire transfer?"
Admittedly, as a board member, he would not necessarily concern himself with knowing all the details of the transaction, and I do not intend to criticize him. However, it continues to amaze me how some companies naively decide to go global.
We went back to basics as I explained how payments work and the importance of having their agreement stipulate the currency and the method of payment.
A well-written agreement, such as a sales contract or a proforma invoice, will avoid misunderstanding among all parties. It should clearly indicate key information including the intended method of payment, as well as merchandise description, pricing and shipping information, Incoterms, and other details to eliminate surprises down the road.
For more information about your export payment options, check out the article: 10 Terms You Need to Know to Get Paid for Your Exports.
This article was first published in December 2017 and has been updated to include current information, links and formatting.