What can be done to combat the risk of international payment default?

What is an international payment default?

Un international payment default refers to the non-payment of an invoice by a foreign customer within the agreed deadline. This may be late payment or total non-payment, whether voluntary or involuntary.

This type of situation is more frequent in the export market than in the local market, as several factors increase the risk:

• Geographical distance

• Bank processing times

• Different legal systems

• Currency volatility

According to Allianz Trade , 40% of exporting companies suffer at least one payment default a year . The consequences are direct:

• Cash flow tension on cash receipts

• Commercial disputes time-consuming to solve

• Risk of dry loss in particular if no down payments or guarantees have been negotiated

Why is the risk of default higher internationally?

Doing business abroad exposes you to additional risks not found in local exchanges.

These risks make collection more uncertain and costly, especially when no safety net has been put in place upstream.

The distance and complexity of collection procedures

The further away a customer is, the more complicated it is to monitor payment, follow up or initiate legal action .

In the event of a dispute, delays lengthen and costs soar. Without a local partner or specialized lawyer, the chances of recovering money drop drastically.

Differences in regulations and legal systems

Each country has its own rules: limitation periods, contractual requirements, jurisdiction . This legal vagueness often works to the disadvantage of foreign suppliers, who have to deal with procedures they have no control over.

Local political and macroeconomic risks

Economic crises, international sanctions, political instability: all these factors can block a payment or freeze a transfer.

According to Euler Hermes country risks are one of the main export default triggers especially in emerging markets.

Currency instability and exchange rate fluctuations

Even if the customer pays the invoice, the amount actually received may be much lower than expected, due to the volatility of the exchange rate.

For example, in 2023, the euro lost up to 15% against the dollar This mechanically reduced the margins of thousands of exporters.

What are the solutions for preventing international payment default?

Anticipating risk is often the difference between a profitable export and an invoice that's never collected. There are several ways to secure your transaction from the outset.

Assessing customer creditworthiness abroad

Before accepting an order, it is essential to verify the customer's financial health . You can :

• Request balance sheets or bank statements

• Querying specialized databases

• Rely on local partners or chambers of commerce

Set payment terms at the time of ordering

Right from the quotation or pro forma invoice, you must set a clear framework . This involves :

• Firm deadlines

• Explicit late payment penalties

• A clearly defined payment currency

Use payment guarantees (letter of credit, down payment, etc.)

Certain mechanisms enable limit risks as soon as the order is placed :

• Letter of credit payment is released only if conditions are met

• Down payment part is paid before delivery

• Advance payment possible for new high-risk customers

Use a secure platform like Heropay

Heropay offers a simple and secure for international payments :

• Free exchange rates

• Multi-currency IBANs to receive funds more easily

• Integration with billing tools for real-time tracking

What tools can you use to protect yourself against non-payment?

Even with the best precautions, a defect can occur. So it's a good idea to equip yourself with tools that cover this risk.

Export credit insurance

It covers non-payment by a foreign customer for economic reasons (bankruptcy) or political reasons (blocking of transfers, war, etc.). Some policies indemnify up to 90% of losses .

Documentary credit and bills of exchange

These instruments enhance payment security :

• Le documentary credit obliges the customer's bank to pay as soon as the required documents are provided

• La bill of exchange is a signed payment undertaking, legally recognized in most countries.

Payment solutions with guaranteed rates

Some platforms allow you to set exchange rate at time of invoice issue This avoids any loss due to currency fluctuations prior to encashment.

Diversification of payment methods and IBANs

Not depending on a single channel is a simple lever for streamline cash collection .

Having several IBANs in local currencies allows customers to pay in their own currency, reducing the risk of blockages or error.

How does Heropay reduce the risk of default?

Heropay offers a complete solution for professionals who want to cash in with confidence even internationally:

• From IBANs multi-devises to receive payments locally

• From transparent exchange rates in line with those of Visa

• Un real-time tracking of your transactions

• The possibility of centraliser vos flux to keep control of your cash flow

With Heropay, you reduce both fees and the risk of non-payment We offer you a wide range of products and services, while providing your customers with simple, efficient payment methods.