Paying for Imports: Payment terms and how the process works…
Narich (Pty) Ltd is an importer of foreign manufactured goods and services, as a result, we have to pay in the currency of the country of origin, typically Euro or US Dollars. Our pricing is also strictly controlled by our principals and we cannot deviate from the pricing guidelines that are provided to us.
We have developed a process where we are upfront about the costs of the purchase in a foreign currency.
How does this process work?
Due to the large fluctuation between the Rand and foreign currency, when customers request a quotation locally, we quote in the foreign currency. This helps customers estimate what a Rand value may be, since foreign pricing policies are usually stable.
In this initial quotation in EURO or USD, we provide an estimated budget value in RANDS that customers can use to estimate the amount of CAPEX required to purchase the device. This is only an estimate and a more accurate value is provided at the time of order.
When the time comes that the customer wishes to place an order, we will create an Invoice or Pro-Forma Invoice (PFI). The PFI will reflect the actual amount due at the prevailing exchange rates.
These documents also include Terms and Conditions. Please see full Terms and conditions here.
Narich (Pty) Ltd requires 100% in Rand placed on order. Why?
- Each instrument we sell has been made to order, so it is made for the customer.
- No stocks are held locally as innovative instruments are modified continuously , and we like to offer the latest version in all respects.
- Low stocks are held globally in the supply chain from the manufacturing country, via Europe, eventually being shipped to our African customers.
- Our suppliers (Principles whom we represent) are not used to long payment periods, Europe typically settling in fewer days than South African companies. For more information check out this link.
- Even more interesting, on average, 42.6% of the sales to domestic B2B customers were transacted on credit, the balance are CASH. In South Africa customers, even those whose payment record is poor, feel entitled to being granted credit.
Upfront payment is crucial to us. Why?
- We have to pay our creditors and do not feel obliged to fund our debtors. We are not a bank.
- Our creditors bill from date of order, or sometimes shipment. We are not inclined to wait for long periods for settlement, as apart from funding our customers cash flow, we run extreme risk of currency fluctuations during the waiting period. In these regards with foreign exchange, we are not gamblers either.
A quick look at the McDonalds Big Mac Index traced over 16 years will show you the decline of the Rand value to the Dollar. The daily fluctuation is also sometimes moving 11 -12%.
|CUSTOMERS SAY…||WE SAY…|
|Why don’t you buy Forward Cover to lock in Exchange Rates?||When you are a small company, if you want foreign exchange, you have to buy it. If we have to purchase Forex at a known rate in August and get paid in October, again we are gambling with the exchange rate going only one way. Typically the Rand moves up and down, but which way when is never clear.|
|We have a margin to cushion the fluctuation||If we allow our margin to be eroded with every sale, we will also erode our ability to service and support our customers, establish workshops, training skills and literature. As a Director, I will also be seen as reckless.|
|Your exchange rate differs from what I heard on the radio.||It will always differ because the radio broadcasts the average Buy/Sell Median, not the actual price we pay for money on the day.|
We have very little discretion when it comes to exchange rates. We cant pay our principles when we feel like, and we cant pay salaries when we feel like it.
As a company, it should be viewed as unethical trying to use small technical suppliers as your banks. Why aren’t you happy with your actual bank?