In this, the global age of small business, sometimes it is the little things that cause the biggest headaches. Start-up Journal looks at the challenges of that going global can have on one of the most basic aspects of commerce -- exchanging cash for goods or services.
Question: We are a small manufacturer and want to purchase some component parts overseas. The overseas entity doesn't want to ship without payment. Yet we don't want to pay before we are sure that the goods will come and they will be of the quality represented. What are our options?Answer: You're asking one of the age-old questions of international trade: How do a buyer and seller handle payment so neither gets burned?
Banks generally offer several ways to reduce the financial risks of trade, but the payment procedure ultimately depends on how much trust the parties have developed, which company has more leverage and the types of goods ordered.
In other words, while banks can help (often for a sizable fee) there is still some relative degree of risk taken by both sides of the transaction. Understand the risks that you are taking while trying to bring down your costs. There is almost always a trade-off in these things. And when thinking about the savings from outsourcing, make sure to be clear on all of the costs, including bank fees for the transaction.
