A few months ago, an EDC client called in with a quandary. One of their international customers had failed to pay a substantial invoice. Services had been rendered, the invoice sent, but no money was received. That feeling of uncertainty had begun to take root.
This company first connected with EDC three years ago. They were a small company, well-established in their local market, and had an opportunity to start exporting when an international customer called looking to use their services.
Having never worked with clients outside of Canada, they looked into insuring their contract to make sure they got paid. They signed up for EDC Select Credit Insurance (Trade Protect), our short-term coverage solution, ideal for those exploring relationships with new customers.
Their first foray into exporting was a success. When the international customer approached our client again the following year, they again opted to use credit insurance to insure themselves against non-payment. Another successful transaction.
On both occasions, credit insurance offered peace of mind. The transactions ultimately went smoothly; so smoothly, in fact, our client didn’t seek protection when they engaged their international customer for a third time.
Feeling comfortable with the customer, they opted out of purchasing Trade Protect for the third contract. Despite parting on good terms with the customer, repeated attempts to collect payment failed over a number of months. Without credit insurance in place, there was no way to retroactively insure the loss.
Eventually, the customer did resurface and pay the amount owing on the invoice. But the months of waiting was a lesson learned for the company president.
Our situation turned out just fine, but it could have also gone the other way and we would have found ourselves in a difficult spot. For us, if we do any international business like that in the future, we will definitely ensure we have insurance in place through EDC.
EDC’s got your back when international customers don’t pay. But it’s never fun to wait around.
6 tips to encourage customers to pay on time:
- Create a system or software to manage and organize invoices and accounts receivable.
- Set up reminders to send invoices to your customers immediately after the services have been rendered. The sooner customers receive their invoices, the sooner they’re likely to pay.
- Make it easy to get paid. Offer your customers different payment methods like debit, credit and e-transfer.
- Pick up the phone. It’s easier to engage customers one-on-one with a phone call and there’s less chance of miscommunication.
- Set clear payment terms. Contracts and invoices should clearly, even redundantly, state your payment terms so there is no confusion on payment deadlines. Many businesses require upfront payment terms when dealing with a new customer. Credit insurance allows you to offer more attractive terms.
- Keep it professional. Even when a customer doesn’t pay on time, maintain good relations. When communicating about past due accounts, don’t burn bridges. You may, once you’ve received payment, want to maintain this company as a recurring customer.