A Kind Reminder of Deadbeats
Posted by: Jenny | 2016-12-06 15:04:25
In foreign trade, generally there are 2 kinds of deadbeats. One is subjective, which means they are able to pay but not willing to do so; the other is objective, which means they are willing to pay but not capable to do that. The following are the 8 types of objective deadbeats.
1.Sudden increase of order
If your customer suddenly make an unusual scale of order which is not transferred from other suppliers, you should be careful if he has the ability to sale them out in case that your customer is being over-optimistic, because the risk of irrational purchase will ultimately transfer to the supplier. .
2.Trade with several suppliers at the same time
With the formation of the buyer's market, the competition among enterprises is increasing rapidly, which leads to a phenomenon that a buyer usually enquiries more than one supplier before he makes an order. However, for the same product, a powerful buyer tends to select only two or three suppliers for long term cooperation. Thus, if your customer makes order with several suppliers, what he really cares is probably not supply ability, rather, he wants to find more suppliers to get more orders on credit to avoid financial flows.
3.Emerging downstream market
When a buyer boasts that his company occupies the majority of market share, don't be too excited. Instead, think about the duality of the superiority. Moreover, if it's a high risk market, then it's negative news. If the downstream market fluctuates, it will crucially affect the buyer's business.
4.High liability enterprises
If the buyer requests you to grant him credit, for that he is in serious debt and needs your support, you should be careful! When his income cannot cover his debt, or when the financial institution implements tightened policy, the buyer's capital will be affected, resulting in procrastination in payment with the upstream suppliers.
5.Continued extension of credit period
Extensively used credit sales have become a major mean to promote corporate competitiveness in international trade. If you regard the buyer's continued extension of credit period as a common practice, then you might be wrong. When the extended period is longer than the common practices or the returned payment of downstream supplier, you need to be alert that the buyer might put the money to other use.
6.Operation deviated from main business
As long as you know that the buyer is making major investment in non-core business, you must consider if this investment affects his core business, which is related to the payment, rather than merely admiring his great purchase power.
With the development of international trade, more and more buyers are using legal means to protect their own interest to alleviate the side effects caused by operation failure. Here is a typical example: A well-known buyer purchase from offshore by establishing a buying agency in a third country. Due to the independence of the legal person of the buying agency, it's hard to pursue legal action on the parent company for the payment responsibility.
8.Buyers from highly regulated countries
Receipt of payment depends on both buyer's purchase power and the region in international trade. In some highly regulated countries like Iran or Venezuela, many buyers have great purchase power and are very willing to pay for imported goods. However, due to the country policy or lack of foreign currency, the buyers cannot make it through the payment process.
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