The British Chambers of Commerce survey results released this month suggests that the economy will continue to strengthen gradually over the next year, with growth slowly improving. The Quarterly Economic survey is made up of responses from more than 7,000 businesses across the UK. Figures for exporting show a dramatic improvement with over 40% of business seeing export sales increase and 36% reporting an increase in export orders.
With exports clearly on the increase exporters need to be ever mindful of securing their export payments and a Letter of Credit is an ideal way to do this.
So what exactly is a Letter of Credit? Quite simply, a Letter of Credit can guarantee payment for export and provide considerable security for the exporter. When you export your product or service, your buyer’s bank opens a Letter of Credit and assumes the risk of paying for the goods specified. Very strict terms and conditions apply for the bank to make payment and if you meet all of the stated conditions, payment is guaranteed.
The cost to UK business through the presentation of non compliant documents under Letter of Credit is estimated to run into hundreds of millions of pounds per year.
Preparation of all documents called for by a Letter of Credit requires meticulous care and attention to detail. Staff undertaking Letters of Credit need knowledge of both the shipping world and the banking industry. They also need ongoing training.
Business West, a leading business support organisation provides an online export toolkit – Acorn Interactive – which provides a fully managed Letter of Credit service. The service includes:
▪ All terms checked and compliance ensured with any amendments advised
▪ All your paperwork created for you
▪ Arrangement of transport and liaison with your freight forwarder
▪ Liaison with third parties such as Inspection Agents
▪ Documents submitted to the bank on your behalf
Phil Smith, Managing Director at Business West said: “Exporters are looking for the added security that a Letter of Credit can give them. Rather than just invoicing customers they are not leaving it to chance."
A Letter of Credit is complex and interpretation of the rules can pose problems. On average exporters only get their paperwork correct 30% of the time which can lead to delays. However Acorn Interactive has a 98% success rate which explains why companies come to us from all over the country.”