Online Service Businesses: Strategies to Secure Payments from Clients in Emerging Markets
By definition, emerging Markets "have yet to reach, among other characteristics, the technological and economic development of developed markets.” -Wikipedia.
If you are an online service firm doing business with clients in emerging markets, you may experience unique banking, online payment, creditworthiness, and even customer integrity risks that can cause major service and cash flow disruptions.
Here are 6 strategies to protect your business by securing online payments and business from clients in emerging markets:
1. Offer Internationally Accepted Payment Methods
Facilitate a seamless buying experience for your clients in emerging markets clients by integrating regionally accepted payment methods such as providing your full international bank transfer details on your electronic invoices for clients in centrally controlled fiscal regimes or accepting mobile payments through third-party platforms such as NALA Money and Remitly
2. Request Full Payment Prior to Service Commencement
Develop payment policies that require the client to make a lump sum payment or payment plan deposits that are to be completed prior to service commencement.
Understand that this is a risk to your client; you are asking them to have faith that you and your business with deliver as agreed. The onus is on you to prove your trustworthiness. This is easier to prove for businesses with an established track record and have the backing of credible reviews and testimonials.
3. Request a Deposit to Mitigates Risks
Build-in service terms that secure a deposit that covers your fixed costs under contract as well as any variable costs you and third parties incur during this performance period prior to receiving further client payments for the next.
A significant deposit mitigates the risk associated with working with clients in unpredictable market and fiscal environments and or new clients you have yet to establish trust relationships. In the unfortunate event of future payment disruptions, your business will not be encumbered by sunk costs you cannot recover nor third-party reputational and legal costs you may not recover from.
4. Penalize Delinquency
Where you are unable to set up direct debits from your client payment method and have to depend on the client's initiative to pay billed invoices, levy punitive penalty fees for late and incomplete payments.
This discourages payment delinquency. It also builds a buffer fund from which to pay for your expenses incurred in the execution of your client service.
5. Restrict Transactions to Major Credit Cards
Depending on the nature, scope, and value of your services, you can restrict payment to major credit cards to eliminate risks of non or returned payments that you may be exposed to through other payment methods that are at the client's or their banking partner's discretion.
6. Set Up an Escrow Account
Have your clients deposit funds to an escrow account from which scheduled payments can be made into your business account.
This way, the client won’t have to worry about your non-performance and you won’t have to risk their non-payment.
Do you operate an online service business?
What payment system have you built into your operations?
How do you mitigate payment risks?