With delayed Letter
of Credit payments such a serious issue for exporters, what
steps can you take today to expedite receipt of your payments?
Your options depend for the most part on whom you assign
to assume responsibility for your export transactions. Let's
consider the effects of selecting each of the most likely
candidates: your own staff, your freight forwarder, and your
bank.
In-house letter of credit processing
As we've already seen, if expediting payment while minimizing
total costs is your objective, processing Letters of Credit
in-house is probably the least effective approach
Expect to spend many man hours, more than 6-10 days worth
in the case of staff without experience, to process L/C documents
correctly. Even after all that time and effort, your staff
will never be able to offer any guarantees, either of discrepancy-free
documents, or of payment.
During this time, plan on delays or cancellations of other
tasks at which these individuals are more productive or for
which they've been trained. Also expect hundreds of dollars
worth of bank penalties and courier fees to add up quickly.
Also expect human resources to also get involved at some
point. Without proper training and experience, first-rate
computer application support, the right contacts in international
finance, and a rare mix of incompatible personal characteristics
(intelligence, clerical accuracy, perseverance, tenacity,
patience, and love of pressure) you are probably setting up
your colleagues to fail. It's not a question of whether morale
will suffer. It's a question of when, and how much, and whether
turnover will result.
Relying on your freight forwarder
Here the issue boils down to allegiance. Many exporters do
let their freight forwarder manage documents, but that's not
exactly a shrewd choice for two reasons. First, forwarders
get paid to move freight, not to manage documents. Second,
the overseas buyer--the party to a letter of credit transaction
least likely to care about fast payments‹pays the freight
forwarder.
In other words, because freight forwarders do not work for
exporters, exporters have difficulty holding freight forwarders
responsible. Instead, smart exporters need the support in
this situation of experienced advocates who have clear incentives
to recover payments rapidly.
Relying on your bank
This is another lousy idea for two reasons. First of all,
banks can modify these documents, but they can¹t draft
the originals, and many of the mistakes in Letter of Credit
transactions happen at this early stage. So a decision to
rely on your bank is really a decision to rely both on your
bank and a freight forwarder. And we¹ve already seen
how freight forwarders have no tangible incentive to care
about your documents, or your payment.
Even if banks could draft original documents, relying on
your bank would still be a slow process. Expediting export
payments requires more than just the expertise of bankers.
Rapid payment delivery requires a team approach, and the collaboration
of bankers with experienced document preparation specialists.
Moreover, banks don't typically use relational databases and
other types of sophisticated electronic commerce technology
to speed up LC processing and reduce errors. At most banks,
cutting and pasting in a word processor is about as sophisticated
as things get.
Outsourcing with QLC
Working with Quality Letters of Credit is the best way to
expedite your letter of credit payments. While working with
QLC,you can expect the following immediate results:
• Faster payments: You can expect
your payment in far less time, usually in a range between
only one-seventh to one-third of the typical 21 day waiting
period.
• No review or correction delays because
QLC-prepared documents are discrepancy-free.
• Freedom from involvement: QLC gathers
all information from your freight forwarder and bank. That
frees up your company's time for more important or productive
tasks, and saves you money.
• Convenient updates: You can always
expect updated information on your letters of credit and payments
through our web-based reporting system, available 24 hours
a day. We can also supply you with alerts via email and fax
during business hours
• A double guarantee: Not only will
you receive a guarantee of rapid payment. In addition, your
discrepancy-free guarantee means you will never pay a discrepancy
fee to a bank.
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