Similarly, it is advisable to study your client's financial situation – for example, by conducting customer credit checks – before negotiating invoice payment terms, to assess their ability to pay on time. In the UAE and KSA, understanding your client’s financial health is crucial given the diverse business landscapes and regulatory environments.

The company's financial statements can be used to estimate their solvency in the short and medium term. Specifically, you should examine their operating cash flow – the cash generated by current operations – and their debt-to-income ratio, compared to industry benchmarks. This assessment helps gauge their financial stability and their capacity to meet payment obligations.

You can also request a credit report that outlines your client's payment history with other companies. The credit score, typically ranging from 1 to 100 with 75 considered excellent, provides insight into their likelihood of paying on time and their overall financial stability. Several banks and companies in the UAE and KSA offer services to produce such credit reports or credit scores.

Beyond financial aspects, it is useful to gather information about your client's reputation, their bank’s reputation, their business practices, and the background of the company's top managers before setting payment terms. Establishing a commercial credit relationship in the UAE and KSA is also built on trust, and understanding these broader factors can enhance business relationships and effectively mitigate risks.

“Terms of sale” are the fundamental and most crucial payment terms of your contract: cost, volume, delivery, payment method, and date. They must be explicitly clear.

In your contract, trade credit manifests as a “line of credit,” detailing how payment is scheduled over time. This differs from “payment in advance” (PIA), where payment occurs before delivery, and from “cash on delivery” (COD), which requires immediate payment upon delivery.

With a line of credit, clients in the UAE and KSA may negotiate a discount for early invoice payment or a rebate for timely payments. This mechanism can be highly beneficial as it incentivizes prompt payment and fosters long-term loyalty.

Example. A client is granted a trade credit with terms of “5/10 net 30”: if payment is made within 10 days, the client is offered a 5% discount. If not, the full amount is due within 30 days.

You can also negotiate a partial upfront payment or a deposit as a counterpart to longer payment terms.

Behind the technical and financial aspects of negotiating payment terms lies a more comprehensive business strategy. You must consider what kind of long-term relationship you want to build with your customer.

A loyal and regular client deserves recognition: these accounts form the foundation that sustains your business, ensuring recurring orders and the stability of your operational cash flow.

Similarly, in the event of outstanding invoices, maintaining a good customer relationship and resolving any tensions promptly can prevent delayed payments from becoming non-payments.