The Three Cs of International Credit

If there are two words that characterize the business climate in the global village, they are "intense competition."  Country, currency and culture risks are inextricably linked when making sales to foreign buyers.  For this reason, credit professionals responsible for managing foreign credit risk must consider all three factors in unison.  Increasing global competition and the need to increase sales necessitates a holistic approach to credit risk assessment. 

Globalization is not just a cliché. It is happening all around us as businesses increasingly look at the world as if it had no national boundaries. With globalization, competition intensifies.   Under these circumstances, the only companies that will succeed are those that are capable of providing customers first-class products and services, along with competitive payment terms.

Exporting companies often enjoy substantially lower costs of funds than many of their important sales territories. To pass on some of the benefit to customers in the form of open account credit terms is simply good business. It will become increasingly difficult to sell on terms such as cash in advance, wire transfer, Letter of Credit, or Cash against Documents.

While it is often more apparent as to understanding how currency and country issues may impact risk, the global credit manager may question the value and significance of examining the cultures that exist in countries where export business is currently occurring as well as where export sales are projected to increase.  A proactive company and credit department recognize that personal and company relationships still are critical, both in the development of new markets and to ensure that payments are received in a timely manner.

Edited by Michael C. Dennis.  Mr. Dennis is a consultant specializing in improving the quote to cash process.  He can be reached by email at mcdennis13@yahoo.com with questions or business inquiries.