# Export Business Credit & Collection Guide: Getting Paid Across Borders

Selling overseas opens new markets—but also new risks. Currencies fluctuate, documentation errors delay customs, and distant buyers may default. This guide lays out a practical roadmap for Indian SMEs to **extend credit safely, collect payments efficiently, and protect cash flow** in export trade.

---

## 1  Know Your Export Credit Risks

| Risk Type | What It Means | Example |
| --- | --- | --- |
| **Commercial** | Buyer’s unwillingness or inability to pay | Insolvent importer in Europe |
| **Country / Political** | Government actions or instability block payment | FX controls in Nigeria |
| **Currency** | FX swings erode margin | ₹ appreciates after USD invoice |
| **Transport / Document** | Errors or damage halt cargo release | Missing BL endorsement |

Start every deal by mapping which risks you can control, transfer, or price into your offer.

---

## 2  Choosing the Right Payment Method

| Method | Seller Risk | Buyer Convenience | When to Use |
| --- | --- | --- | --- |
| **Advance Payment** | Nil | Low | New buyer, bespoke goods |
| **Letter of Credit (LC)** | Low (bank-guaranteed) | Moderate cost | Large value, unfamiliar buyer/country |
| **Documentary Collection (D/P, D/A)** | Medium | Good | Repeat buyer, stable market |
| **Open Account (Net 30/60)** | High | High | Trusted buyer, strong insurance |

Always align payment terms with buyer risk profile and margin buffer.

---

## 3  Risk‑Mitigation Toolbox for Exporters

1. **ECGC Trade‑Credit Insurance** – Covers up to 90 % of invoice if buyer defaults or political events block payment.
    
2. **Standby Letter of Credit (SBLC)** – Acts like a payment guarantee without complex LC documents.
    
3. **FX Forward Contracts** – Lock exchange rate on invoice date.
    
4. **Incoterms 2020** – Use CIF or CIP if you prefer control over freight and insurance; EXW shifts risk to buyer.
    
5. **Bank Export Factoring** – Discount insured invoices; cash in 48 hours.
    

---

## 4  Documentation Checklist for Smooth Collection

* Commercial Invoice – Match PO & LC wording exactly.
    
* Packing List – Units, HS codes, net/gross weight.
    
* Bill of Lading / Air Waybill – Original copies endorsed to LC‑issuing bank.
    
* Certificate of Origin – Prefer digital via DGFT portal.
    
* Insurance Certificate – “All‑risk” cargo cover if using CIF/CIP.
    

> **Tip:** Use digital documentation platforms (ICEGATE, TradeLens) to minimise courier delays.

---

## 5  Collections Workflow for Export Receivables

1. **Proactive Tracking** – Email buyer POD and due date immediately after shipment.
    
2. **D‑3 Reminder** – Send invoice, bank instructions, and SWIFT copy.
    
3. **D+5 Follow‑up** – For D/P or open account, confirm bank receipt; escalate via phone.
    
4. **D+15 Escalation** – Warn of LC/SBLC drawdown or insurance claim filing.
    
5. **File ECGC Claim** – Within policy timeframe (30–60 days after due) if unpaid.
    

Automate reminder schedule via **PayAssured Export AR module**; integrate with ICEGATE for shipment status.

---

## 6  KPIs to Track

| KPI | Target |
| --- | --- |
| Export DSO | ≤ 60 days |
| % Covered by Insurance/LC | ≥ 80 % of export AR |
| Discrepancy Rate in LC Docs | < 2 % |
| FX Gain/Loss vs Forward | ± 2 % budget |

Review monthly; adjust terms or hedges accordingly.

---

## 7  Legal & Dispute Resolution Basics

* **UCP 600** governs documentary credits; follow article wording.
    
* **Incoterms** define risk transfer—state city/port (e.g., CIF Hamburg Incoterms 2020).
    
* **Arbitration Clause** under SIAC or ICA for cross‑border disputes.
    
* **Bill of Exchange** provides legal recourse under Negotiable Instruments Act for D/A terms.
    

---

## 8  Common Pitfalls to Avoid

* Accepting “soft clause” LCs (buyer can stall shipment acceptance).
    
* Relying solely on proforma invoice; always secure formal PO or LC.
    
* Issuing invoice in foreign currency without FX lock.
    
* Missing ECGC claim deadlines—file within policy window.
    

---

## 9  Action Plan for First‑Time Exporters

1. Enrol with IEC & DGFT; register on ICEGATE.
    
2. Vet potential buyer via international bureau (Dun & Bradstreet) and trade references.
    
3. Offer LC or SBLC terms until trust builds; insure via ECGC.
    
4. Use PayAssured to monitor ageing and automate dunning in buyer’s time zone.
    
5. Reassess credit limits every shipment or quarter, whichever earlier.
    

---

## 10  Key Takeaways

* Match payment method to buyer risk and deal size—advance > LC > D/P > open account.
    
* Use insurance, hedging, and Incoterms to transfer controllable risks.
    
* Perfect documentation is non‑negotiable for LC compliance and faster cash.
    
* Automate reminders and claim filings; delays erode recovery chances.
    

> **Remember:** Export success isn’t just about winning orders—it’s about collecting every dollar, euro, or yen on time.