Running an international trading operation can be risky, especially if you’re working with new customers in a location where your company has not yet set up its own offices. For many exporters and importers, this is simply a fact of the business, which is why there are so many resources dedicated to providing merchants with up to date information about the most secure ways to set up payment and the lowest-risk options for providing buyers with credit. Of course, most of those resources appear a little dated when you go looking for information about electronic payments and instruments, because they are based around commercial financing options like bank letters of credit. Today’s import/export companies also have a unique set of tools that have never been available before, though, as mobile payment processing and instant electronic payment formats have diversified. That’s why it might be time for exporters and other trade suppliers to set up an imports and exports merchant account.
Reducing Risk With Electronic Payments and Cash-on-Delivery
Traditional cash-in-advance payment is the most secure for exporters, but it can be risky for buyers because it involves paying out before receiving goods. With electronic payment, though, cash-on-delivery is possible with instant payment methods, some of which are among the most sophisticated in the world. This allows for the receipt of payment the moment the ownership of goods gets transferred, but it also makes all the traditional methods of resolving payment easier to implement, including documentary collections. Using a business credit or debit card increases security for the client company too, because it opens up standard fraud protection avenues for customers who opt to take that route. More importantly, a merchant account allows you to take electronic payments of all kinds, not just credit and debit cards.
Secure, Inexpensive ACH Transactions
More and more, companies are finding their clients love the idea of ACH transactions for their high security and instantaneous processing. Whether you’re receiving payment in advance, offering ACH payment to customers on an open account plan, or using it for cash-on-delivery transactions, it provides your customers with peace of mind while lowering your transaction processing cost. Adding ACH to a payment processing plan is usually an extra service, so make sure you inquire with your imports and exports merchant account provider about payment processing for ACH if your business is interested. It can speed up your collections process and reduce the overall cost of taking payments by a lot, just by offering customers an option beyond credit and debit.
Make Payment Easier for Open Accounts
Even when you need to meet a customer’s needs by allowing for a higher-risk payment relationship like invoice plus 90, you can make collecting easier for your accounts department by providing electronic payment options. Often, customers who can simply run a business card for the invoice amount will do so before the invoice due date, just to have it out of the way. It’s easier to handle payment quickly when you can use credit resources, after all. For those who do wait through their entire grace period, an electronic payment processes faster, so you’re not out the extra week or so that it could take for paper checks to process.
Credit Cards Simplify Documentary Collections
The payment method with the best balance of risk for both the importer and the exporter is called documentary collections, and when you break it down, it’s a very complex version of the payment agreement you make when you sign up for a credit card. This means that the exporter trusts their bank to collect the payment from an importer’s bank at the point where delivery is confirmed, and then the two parties process the transaction when goods change hands. Setting up such an agreement from scratch is complex and often requires legal contracts be drawn up between the two companies involved in the transaction and their banks, which can bog down the process. By contrast, using a merchant account means essentially allowing the payment processor to be the seller’s designated bank and the card issuing company to work on behalf of the buyer. It’s essentially just a ready-made version of documentary collections with its own built-in dispute resolutions service, which means you can take payment via card in advance without putting the burden of risk on the buyer that advance payment usually involves. It also reduces the need for cash-on-delivery arrangements, whether they are made electronically or not.
Setting up a Merchant Account
If you’re an importer or exporter who has never worked with electronic payments before, you’ll need a merchant account to begin accepting them. Most account providers will be able to offer you credit card processing or a referral to a company that does offer it, but additional services like support for ACH transactions might need to be added on. When you work with Instabill, it’s easy to get everything in one place, including ACH services, and that can simplify your setup even more.
