by Craig Hannaford, CGA
There are many challenges to conducting business with overseas partners. Different laws. Different regulations. Different financial reporting. Different cultures, different values. It can be tempting — especially when there’s money on the table and big plans for the future — to simply trust the integrity of partners and get on with the art of the deal.
But beware. You wouldn’t order a product from overseas without doing a little due diligence. And you wouldn’t sign a deal with a domestic partner without first verifying their credentials. So you wouldn’t enter into a deal with a foreign partner without conducting a background check. Would you?
The good news is, that with a few basic steps, you can determine whether business with a prospective foreign partner is even worth pursuing.
MINING A FOREIGN OPPORTUNITY
You run a manufacturing company that makes machine engines for the mining sector. You have a quality business and do well financially but you’re always looking for ways to grow your sales. The prospect of expanding into foreign markets is extremely appealing.
As luck would have it, you receive an email from an import company based in one of the hot, new emerging markets of the world. The president of the company, Mr. Jones, says that his company, Jones Engineering, wants to import your machine engines. (We’ve used a fictitious business scenario but the example can be applied to all sectors.)
You know all about emerging markets and how their growth is driving commodity prices ever higher. Big profits are being made in the mining sector and overseas companies are investing big-time in equipment and technology. You see an opportunity to cash in. It sure looks like a perfect storm of profit.
Mr. Jones places an order for two engines at $10,000 each. He insists that you don’t ship the engines until you receive his bank draft of payment.