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Ultimately, every exporter is entering the international market in the pursuit of profits and growth. However, key to achieving success when exporting is being able to assess the risk posed by a particular export transaction and taking steps to mitigating that risk. Mitigating the risks of a particular export transaction could include negotiating the use of a suitable Incoterm®, selecting an appropriate mode of transport or taking out the right marine insurance cover. However, none of these do much to mitigate the risk of you not getting paid!

Documents play an essential role in successfully exporting your products to your international buyer and are often key to getting paid. Export documents also prove that certain procedures have taken place or serve as instructions that specific tasks must take place. The relevance and accuracy of documentation are essential to your success in the export market. However, for your documents to be relevant and accurate, you need to understand their purpose and why they are essential.

For an exporter, financial risk in international trade usually manifests itself as non-payment by a foreign buyer. Thus, as an exporter, your ability to manage international financial risk is essential to your company getting paid. Ultimately, the right Incoterm®, the right export marketing plan and an ideal mode of transport mean nothing if your buyer doesn't pay you!

As we discussed in our 'payment methods in international trade' article, a letter of credit offers an exporter protection against the risk of non-payment by a foreign buyer. Under a letter of credit, the issuing bank in the buyer's country agrees to pay the agreed amount of money on the condition that the exporter presents certain documents and complies with the terms of the letter of credit. This article elaborates on the mechanics of a letter of credit.