Blogs

Payment delays can occur in international trade, even when businesses have established relationships with their customers.

A missed payment does not always mean that a buyer is unable to pay. However, understanding how a payment delay can develop into a more serious non-payment situation is important for exporters.

Trade Credit Insurance can help businesses manage eligible non-payment risks, but taking appropriate action when a payment becomes overdue remains essential.

What happens when a payment becomes overdue?

When a buyer does not pay by the agreed due date, the payment becomes overdue.

This may happen for several reasons, including:

• Administrative or processing delays
• Temporary cash flow difficulties
• Disputes relating to a transaction
• Financial challenges affecting the buyer

Not every overdue payment results in a financial loss.

Understanding the reason for the delay is an important first step in determining how to respond.

When can a payment delay become a default?

A payment delay may become a more serious concern when the buyer continues to fail to meet its payment obligations.

In Trade Credit Insurance, prolonged non-payment may be considered protracted default when the applicable conditions and waiting periods are met.

In other cases, a buyer may become insolvent, meaning it is unable to meet its financial obligations.

The distinction is important because different circumstances may affect how a non-payment event is assessed under an insurance policy.

What should exporters do when a buyer misses a payment?

When a payment becomes overdue, exporters should take a structured approach.

This may include:

• Contacting the buyer to understand the reason for the delay
• Keeping records of communications and outstanding invoices
• Monitoring the overdue amount and any agreed payment arrangements
• Following internal credit management procedures
• Notifying their insurer when required under the policy

Taking action early can help businesses manage the situation and maintain the documentation needed if the payment issue continues.

Why does this matter?

Understanding the difference between a payment delay and a more serious non-payment event helps exporters respond appropriately.

It can also help businesses:

• Monitor outstanding receivables more effectively
• Identify potential payment problems earlier
• Maintain accurate records
• Understand when further action may be required

A missed payment should not automatically be treated as a loss, but it should not be overlooked.

A practical example

A UAE exporter supplies goods to an overseas buyer on 60-day payment terms.

When the payment becomes overdue, the exporter contacts the buyer to understand the reason for the delay.

The buyer initially indicates that payment will be made shortly, but the amount remains outstanding.

The exporter continues monitoring the situation, documents its communications, and follows the required notification procedures under its Trade Credit Insurance policy.

This structured approach helps the business manage the payment issue while preparing for any further steps that may become necessary.

How Etihad Credit Insurance (ECI) helps

Etihad Credit Insurance (ECI) supports UAE exporters by:

• Providing protection against eligible non-payment risks
• Helping businesses understand their responsibilities when payment issues arise
• Supporting exporters through the applicable notification and claims procedures
• Helping businesses manage the financial impact of covered non-payment events

Explore ECI's Trade Credit Insurance solutions.