Payment terms in export: how to get paid on time from international clients

Your Singapore client agreed to your quote three months ago. You shipped the goods. They received everything. Now you're chasing payment for the third week straight.

This happens to Indian exporters every day. Not because clients are dishonest. Because payment terms weren't clear from the start.

The solution isn't complicated. Set the right payment terms before you start work. Here's exactly how to do it.

What are payment terms in export?

Payment terms define when and how you get paid for international sales. They answer four critical questions:

When does money arrive?

Before shipment, on delivery, or 30 days later?

What currency?

USD, EUR, GBP, or INR?

Who pays transfer fees?

You or your client?

What documents do you need?

For RBI compliance, GST claims, and bank processing?

Get these wrong and you face:

• Payments delayed by weeks
• Money lost to poor exchange rates
• Missing FIRA documents blocking GST refunds
• Disputes over who owes what

Get them right and you:

• Receive money predictably
• Avoid forex surprises
• Stay RBI compliant
• Focus on business, not chasing payments

The 7 payment terms every Indian exporter must know

How to choose the right payment terms

Use this decision framework:

Question 1: How well do you know this buyer?

Never worked together:

Choose: 50% advance + 50% on delivery

Or: Letter of Credit

Or: Full advance for small orders

Worked together 1-2 times:

Choose: 30% advance + 70% DP

Or: DP terms with clean payment history

Long-term trusted client (1+ year):

Choose: Net 15/30

Or: Milestone payments

Or: Open an account with a credit limit

Question 2: What's the order value?

Under $5,000:

Full or partial advance acceptable

LC too expensive

$5,000 - $20,000:

Advance payment or DP

LC if buyer insists

$20,000 - $50,000:

DP or LC

Consider trade credit insurance

Over $50,000:

Letter of Credit recommended

Risk too high for open account with new buyers

Question 3: What's your cash flow situation?

Tight cash flow:

Demand a higher advance (50%+)

Avoid Net 30/60 terms

Use milestone payments

Comfortable cash flow:

Can offer Net 15/30 to win business

Still demand advance from new clients

Question 4: What's standard in your industry?

B2B services (IT, consulting):

Milestone payments common

Net 30 with established clients

Manufacturing/goods:

30-50% advance standard

Balance on shipment or DP

E-commerce/marketplaces:

The platform holds the payment until delivery is confirmed

Usually 14-30 day payout cycles

Question 5: What's the buyer's country risk?

Low risk (US, EU, UK, Singapore, Australia):

Can extend more flexible terms

Legal recourse exists if needed

Medium risk (Middle East, Latin America):

Prefer advance or LC

Due diligence essential

High risk (sanctions, political instability):

Demand full advance or LC

Consider export credit insurance

May need government approvals

Check country risk ratings:

• OECD country risk classification
• Coface country ratings
• Export credit agency ratings

Real cost analysis: what payment terms actually cost you

Let's see the money impact of different terms on a ₹10 lakh order:

Scenario 1: 100% advance payment

You receive: ₹10,00,000 immediately

Your cost of capital: ₹0 (you have money upfront)

Risk of non-payment: 0%

Total cost: ₹0

Net amount: ₹10,00,000

Scenario 2: 50% advance, 50% on delivery (30 days)

You receive immediately: ₹5,00,000

You receive in 30 days: ₹5,00,000

Your cost of capital: ₹5,000 (12% annual on ₹5 lakhs for 1 month)

Risk of non-payment on balance: 5% = ₹25,000 potential loss

Net amount: ₹9,70,000 (if all goes well)

Scenario 3: Net 60 days (no advance)

You receive immediately: ₹0

You receive in 60 days: ₹10,00,000

Your cost of capital: ₹20,000 (financing ₹10 lakhs for 2 months)

Risk of non-payment: 10% = ₹1,00,000 potential loss

Net amount: ₹8,80,000 (expected value accounting for risk)

Scenario 4: Letter of Credit

You receive: ₹9,85,000 (after 1.5% LC charges of ₹15,000)

Timeline: 7-10 days after shipment

Risk of non-payment: <1% (bank guaranteed)

Your cost of capital: ₹2,000

Net amount: ₹9,83,000

The bottom line:

Loose payment terms cost you real money:

• Opportunity cost (your capital tied up)
• Risk cost (probability of non-payment)
• Collection costs (chasing late payments)

For this ₹10 lakh order:

100% advance = ₹10,00,000

LC = ₹9,83,000 (1.7% less)

50-50 split = ₹9,70,000 (3% less)

Net 60 = ₹8,80,000 (12% less)

Multiply this across all orders over a year. The difference is substantial.

How to negotiate payment terms (exact scripts)

Script 1: New client pushes for open account

Client says: "We only pay Net 30. That's our standard term with all suppliers."

You say: "I understand Net 30 is your standard. As this is our first transaction, I'd like to propose we start with 50% advance and 50% Net 15. Once we build a track record, I'm happy to move to Net 30 for future orders. This protects both of us during the relationship-building phase."

Why this works:

• Acknowledges their concern
• Offers a path to their preferred terms
• Frames it as mutual protection
• Shows flexibility for long-term

Script 2: Buyer wants the full advance removed

Client says: "We can't do 50% advance. Can you do full payment on delivery?"

You say: "I can adjust to 30% advance and 70% within 5 days of delivery. The advance helps me secure materials for your custom order. For first-time transactions, even 30% upfront is standard in our industry—it protects against cancellations and ensures both sides are committed."

Why this works:

• Compromises to 30% (lower than 50%)
• Gives logical reason (material costs)
• References industry standards
• Emphasises mutual commitment

Script 3: Establishing currency and fees

You say: "For currency, I'll invoice in USD at the agreed rate of $12,000. Please ensure the full amount reaches us—all bank transfer fees should be paid by your side. You can instruct your bank to send 'all charges to sender.' This way, there's no confusion about the final amount."

Why this works:

• Clearly states currency
• Specifies that the full amount must arrive
• Gives them exact instructions for their bank
• Prevents short payments

Script 4: Adding a late payment clause

You say: "Payment terms are Net 15 days from invoice date. If payment is delayed beyond 15 days, a late fee of 1.5% per month applies, and work on any pending orders will pause until the account is current. This is standard practice for maintaining smooth operations."

Why this works:

• Sets a clear deadline
• Defines consequences
• Makes it seem routine (not punitive)
• Protects your cash flow

Script 5: When the client asks for longer credit

Client says: "Can you do Net 60 instead of Net 30?"

You say: "I can extend to Net 45 with a 2% early payment discount if you pay within 15 days. This gives you flexibility but rewards faster payment. Alternatively, we can stay at Net 30 at the current price. What works better for your cash flow planning?"

Why this works:

• Meets them halfway (Net 45 vs their 60)
• Incentivises faster payment
• Gives them choice (feels like control)
• Focuses on their benefit (cash flow planning)

Script 6: Responding to "trust me" client

Client says: "I've been in business 20 years. You can trust me. We don't need formal payment terms."

You say: "I absolutely respect your track record. Clear written terms actually protect both of us—it prevents misunderstandings and helps if there are any disputes down the line. How about we keep it simple: a one-page agreement covering payment timeline, currency, and deliverables? This is standard practice for all our clients, regardless of reputation."

Why this works:

• Validates their experience
• Frame terms as protection for both sides
• Keeps it simple (reduces resistance)
• Makes it seem non-negotiable (standard for everyone)

Payment terms for different export types

For goods exporters

Best practices:

Always get some advance:

Minimum 20-30% for new clients. This covers material costs and signals commitment.

Use DP for medium orders:

₹10-50 lakhs range. The buyer must pay to get the documents. You're protected.

Reserve LC for large orders:

Over ₹50 lakhs, or new clients in risky countries. Worth the cost.

Specify inspection rights:

"Balance payment due after goods pass buyer's inspection within 5 days of delivery"

Define freight terms clearly:

FOB, CIF, DAP? Who pays shipping? Include in payment terms.

Manufacturing example:

"Terms: 30% advance by TT within 3 days of confirmed order. Balance 70% via DP at sight after shipment. Buyer covers all bank charges. Shipping: FOB Mumbai. Currency: USD. Late payment clause: Production pauses if the advance is delayed beyond the agreed date."

For service exporters

Best practices:

Milestone-based preferred:

Spreads risk across the project timeline. Regular cash flow.

Shorter net terms:

Net 7-15 for small projects. Net 30 maximum for trusted clients.

Define "complete" clearly:

What proves a milestone is done? Client approval email? Signed-off document?

Address scope changes:

"Additional work beyond the agreed scope will be estimated and billed separately"

Retain IP until paid:

"Source code/design files released only upon full payment"

IT services example:

"Terms: 25% advance before project start. 50% upon completion of the development phase (client must approve within 7 days). 25% upon final deployment and training. Payment is due within 5 business days of each milestone completion. Currency: USD. Method: Wire transfer. All fees paid by the client."

For freelancers

Best practices:

50-50 split works well:

50% to start, 50% on delivery. Simple and fair.

Keep terms short:

Net 7 for small projects. You can't afford long collection cycles.

Use platforms initially:

Upwork and Fiverr hold payments until the work is approved. Safe for both sides.

Transition to direct terms:

Once trust is established, move to direct bank transfers (lower fees).

Freelancer example:

"Terms: 50% advance via PayPal or bank transfer before work begins. 50% due within 3 days of final delivery. Currency: USD. For bank transfers, client covers all fees. Late payment: Work on future projects pauses if payment exceeds 7 days overdue."

RBI compliance for export payments

Indian exporters must follow Foreign Exchange Management Act (FEMA) regulations. Here's what you need:

Required documents

1. Foreign Inward Remittance Advice (FIRA)

What it is:

A certificate from your bank showing that foreign currency has arrived in your account.

Why you need it:

• Claim GST refund on exports
• Prove to RBI that you received payment
• File income tax returns
• Claim export incentives (RODTEP, SEIS)

How to get it:

The bank generates automatically when a foreign payment arrives. Download from net banking or ask the branch.

2. Export Declaration Form (if goods export)

What it is:

Form declaring you're exporting goods, filed at customs.

Who needs it:

All goods exporters

3. Softex form (if software export)

What it is:

Certificate declaring software/services exported.

Who needs it:

Software and IT services exporters

Where to file:

Through the STPI (Software Technology Parks of India) portal

Payment realisation timeline

RBI rule: Export proceeds must be realised within 9 months of shipment (for goods) or provision of service.

What this means:

You can't wait indefinitely for payment. The client must pay within 9 months, or you need RBI approval for an extension.

If payment exceeds 9 months:

• File extension request with RBI through your bank
• Provide a reason for the delay
• May face penalties if no valid reason

Red flags: when to walk away from a deal

Some warning signs mean you should decline the business:

Red flag 1: Client refuses any written agreement

What they say:

"We don't need contracts. We've been doing business for 30 years. Just send the goods."

Why it's dangerous:

Without written terms, you have no legal recourse if they don't pay.

What to do:

Insist on at least an email confirming terms. If they refuse, walk away.

Red flag 2: Client wants to change payment terms after work starts

What they say:

"Actually, we can't do 50% advance anymore. Just invoice us at the end."

Why it's dangerous:

They agreed to terms to secure you, now trying to renegotiate from position of strength (you've started work).

What to do:

"We agreed to these terms before starting. If you can't meet them, I'll need to pause work until we have a signed amendment." Stand firm.

Red flag 3: Client avoids discussing fees or currency

What they say:

"Don't worry about bank fees, we'll handle it."

Why it's dangerous:

You'll receive short payment. Then dispute arises over who should've paid fees.

What to do:

Force the conversation. "Let's clarify now: you cover all fees, correct?" Get written confirmation.

Red flag 4: Client pushes for immediate start without payment

What they say:

"We need you to start urgently. Payment will come next week. Trust us."

Why it's dangerous:

Once work starts, your leverage disappears. "Next week" becomes next month.

What to do:

"I understand urgency. I can start as soon as advance payment clears—usually 1-2 business days." Don't budge.

Red flag 5: Client's references check out badly

What they say:

Nothing directly, but when you call references, they're vague or negative.

Why it's dangerous:

Their past suppliers had problems getting paid.

What to do:

Demand more secure terms (higher advance or LC). Or decline the business.

Red flag 6: Client operates from tax haven with no business history

What they say:

"We're a trading company registered in [British Virgin Islands / Panama / Seychelles]."

Why it's dangerous:

Shell companies with no assets. If they default, you can't recover anything.

What to do:

Verify they're genuine business with real operations. Demand full advance or LC. Consider declining if too suspicious.

Write payment terms that actually protect you

Essential elements to include

Every payment term document must state:

1. Payment timeline

"50% due within 3 days of order confirmation. Balance due within 7 days of delivery."

Not: "Payment as soon as possible" (too vague)

2. Currency

"All payments in USD"

Not: "Payment in US dollars or equivalent" (opens conversion disputes)

3. Payment method

"Via international bank transfer to account details below"

Not: "By any convenient method" (client might use an expensive platform)

4. Fee responsibility

"Client covers all bank transfer fees; full invoice amount must arrive"

Not: Silent on fees (you'll receive a short payment)

5. Late payment consequences

"1.5% monthly interest on amounts overdue beyond 15 days. Work pauses if payment exceeds 30 days."

Not: No consequences (client has no incentive to pay on time)

6. Documents provided

"FIRA will be provided within 48 hours of payment receipt"

Shows you're compliant and gives the client proof