Getting paid

Deciding when to get paid when exporting

What you’ll learn

  • the main types of payment terms
  • how you'd reduce your risk of non-payment
  • how you can decide which terms to offer a customer

Deciding on payment terms

Payment terms are agreements which ensure you get paid the right amount by your buyers, at a time that’s right for you.

With business to consumer sales, the buyer will usually pay at the point of sale. If they're buying online, there is a risk they won’t receive the goods. These risks are reduced by parcel tracking and consumer rights frameworks.

Business to business sales can be more complex. The terms you offer your overseas customer may depend on:

  • how well you know your buyer, and whether it's your first order from them
  • terms the customer may request or expect
  • level of non-payment risk for the market
  • the value of the contract

This lesson covers the main four options. Talk to your bank or financial adviser if you need detailed advice on what’s best for your situation.

Payment in advance

This is the most secure option for an exporter, as payment is received before ownership of the goods is transferred.

In high-risk emerging markets, buyers may already be aware that they will need to operate on these terms. You should also ask for payment in advance if customers are new to you, or have poor credit ratings.


  • Least-risk option
  • Allows you to manage your cashflow


  • You might lose goodwill and willingness to negotiate on other matters
  • Competitors may offer more attractive payment terms

Open account

This is the simplest method of payment. The goods or services on open account terms will be delivered before payment is due.

Payment may be negotiated to be in 30, 60 or 90 days from date of invoice, delivery or completion. You'll need to be absolutely clear when, where and how you will be paid.

Use this method when you have a high level of trust with your customer.


  • Easy and cheap to arrange
  • Demonstrates trust between buyer and seller


  • Highest risk of non-payment and miscommunication
  • May lead to differing expectations and disappointment

Letter of credit

A letter of credit (also known as L/C) is a guarantee from a bank on behalf of the buyer. The bank makes a promise to pay if the buyer cannot do this. They tend to be used in high-risk market with unstable economies.

The money is released when strict terms and conditions are met. This usually involves providing an invoice, shipping and customs documents and quality assurance documents. The information and wording in the documents must tally, and match completely with the information on your export invoice. Not meeting the conditions can delay payment.

You should consider using a Letter of Credit when your exports are high value and you can’t get certainty of payment by any other method.


  • One of the most secure methods of payment for exporters
  • Gives confidence to the buyer - they can guarantee payment in full and on time


  • Takes time to prepare and must be drafted with care to ensure adequate protection
  • Additional fees will apply

Bank collection or documentary collections (D/C)

This is more secure than open account. Your bank collects the value of the invoice on your behalf. Your bank issues instructions to your buyer’s bank for release of the documents against either payment (documents against payment) or acceptance of a bill of exchange (documents against acceptance).

A documentary collection is used primarily for shipments by sea.


  • Reduced risk of non-payment for exporter and non-delivery for buyer
  • Can be quicker and cheaper to use than Letters of Credit


  • Additional fees will apply

Know your customer

Before offering terms to a customer you should:

  • credit reference check them through providers like Experian, Equifax or TransUnion
  • ask them for a bank reference and trade references
  • research them online and visit their offices if possible
  • source information from local Chambers of Commerce or trade associations
  • consider being paid in advance for the first few invoices to build trust

Properly constructed payment terms will be your first safeguard against non-payment. But if you’re in a situation where risk can’t be eliminated, you should consider insurance against non-payment.

It’s essential to know your payment options and what’s involved. But consider how well you know your customer before you make any agreements.

International trade adviser

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