Injecting confidence into international growth strategies  

In their enthusiasm to win new business internationally, many management teams fail to appreciate the nuances of country-specific business cultures. “To avoid getting burnt, it is important to have a suitable understanding of the country’s commercial laws, the local fraud environment, working practices for payment schedules and debt collection, and so on,” says Jackson. 

Many countries simply don’t have the kind of robust financial accounts filing systems that you might be used to, especially when it comes to private companies, which makes it difficult for an individual company to access and assess the creditworthiness of a prospective buyer. Attempts at financial due diligence can also be challenging: in some locations, a simple request to a CFO for a company’s accounts might convey a lack of trust in the business relationship.

Expectations on payments may also have to be adjusted when expanding into new markets. “Even in some major European economies, it is not unusual for merchants to wait up to 90 days for a net 30 invoice to be paid,” says Jackson. “There are cultures where the expectation is that almost nobody pays on time.”

And when invoices remain unpaid, there is another level of local know-how required. “In some countries, the legal process for collection is complex, and collection cases can become very protracted,” says Jackson. “So, where do you go when things go wrong?”

Understanding such local nuances requires deep on-the-ground expertise. Allianz Trade has expert teams in 52 countries worldwide, including local underwriters, legal experts and collections specialists, ready to help companies grow their international business with confidence.

Jackson cites the example of a small specialist in plant machinery parts which received an unsolicited order valued at €300,000 from a new client in Germany – a market it had not dealt with in the past. Because of those uncertainties, its first instinct was to only agree to deliver €60,000 of parts. However, after partnering with Allianz Trade, which vouched for the creditworthiness of the German manufacturer and underwrote the full amount, the parts company went ahead with the complete order. As a result, the German company has become one of its largest accounts.

Exporters often lack visibility into the commercial status of their prospective buyers – and sometimes even their existing customers. In today’s environment of rising insolvencies and rampant fraud the importance of knowing your customers cannot be underestimated.

“When it comes to international trade, there’s been a marked increase in buyer fraud,” warns Jackson. “The whole landscape is very different now. You need to know who you’re actually dealing with, particularly if you’re new to an international market and you don’t have a physical presence there.”

That can undermine the confidence to commit to an order, especially if they are small and medium-sized businesses. Take a not uncommon example of a UK-based company that received a large order from a buyer in China. Without the means of checking the financial track record and credit profile of the buyer – which would have involved accessing and understanding Chinese accounts and credit reports – it had to walk away from the business. 

“When a big, fat order appears, it’s natural to get excited. But how do you know who you’re really selling to and where the transaction is going to end up?” says Jackson. 

That is where credit intelligence services play a crucial role. Allianz Trade maintains an information base of more than 83 million companies worldwide, built on local and global trading records, financial data, and local credit expertise. This constantly updated resource can let you know which customers are financially sound and set an appropriate level of credit, as well as act as an early warning system if a situation changes.

When selling internationally – especially in countries where you lack experience – it is essential to protect your receivables from non-paying customers and potential insolvencies. That makes trade credit insurance a vital part of the armory of every exporter.

The example of a luxury products company provides a salutatory lesson. It took a €1 million order from a buyer’s agent in the booming Chinese market. When the payment never materialized, the company – without much of a track record or any local representation in China – struggled to recover the amount. On subsequent orders, it used Allianz Trade’s Credit Insurance safe in the knowledge that its receivables would be covered in the case of any default and that the China-based Allianz Trade team would work with the buyer in the recovery of the non-payment.  
 
Those kinds of deals involved traditional credit arrangements, but when transactions are online the requirement for protection is even more acute. Indeed, many businesses have steered away from offering net payment terms with online orders, especially when many web orders can come from new, unknown customers and from unfamiliar territories.

Allianz Trade pay solves that dilemma by running instant creditworthiness assessments on your online buyers at checkout, providing you with real-time underwriting decisions for each and every transaction. Backed by our e-commerce credit insurance, the solution protects your cash flow from the risk of non‑payments while unlocking new revenue opportunities.