Role of Overseas Agent & Remittance of Commission
A sales agent acts on your behalf in the overseas market by introducing you to customers who you supply and invoice direct. They are paid a commission for any sales they make ranging between 2.5 per cent and 15 per cent. The key benefit of using an overseas sales agent is that you get the advantage of their extensive knowledge of the target market.
Advantages of using an overseas agent
- You avoid the recruitment, training and payroll costs of using your own employees to enter an overseas market.
- An agent should be well placed to identify and exploit opportunities.
- Your agent should already have solid relationships with potential buyers – it might take you some time to build up your own contacts.
- Using an agent allows you to maintain more control over matters such as final price and brand image – compared with the other intermediary option of using a distributor.
Disadvantages of using an overseas agent
- You remain responsible for shipping and other trade-related logistics – although your agent should be able to help.
- You need to specify in an agent’s contract if you need them to credit check your customers for you.
- Arrangements must be made to allow access to your sales ledger as part of the commission payments process.
- After-sales service can be difficult when selling through an intermediary.
- You may lose some control over marketing and brand image, compared with entering the market yourself.
Remittance of Commission
A remittance is funding that is sent or transferred to another party, usually one in another country. Remittances can be sent via a wire transfer, mail, draft, or check.
Remittances can be used for any type of payment, including invoices. But the term is typically used to in reference to money sent to family members back in a person’s home country.
Remittances have played an increasingly large role in the economies of small and developing countries. They are often used as a way to help raise the standard of living for people abroad and help combat global poverty. In fact, since the late 1990s, remittances have exceeded development aid, and in some cases make up a significant portion of a country’s gross domestic product (GDP).
According to the World Bank’s 2019 Migration and Development Brief, $529 billion in remittances were sent to low-income and middle-income countries in 2018, an increase of 9.6% over the previous record high of $483 billion in 2017. This figure is significantly larger than the $344 billion of foreign direct investment in these countries (excluding China) in 2018.
If we include high-income countries as well, the total amount of remittances jumps to $689 billion, up from $633 billion in 2017.
Remittances are seen as an important part of disaster relief and often exceed official development assistance (ODA).
On the plus side, remittances are also used to help those living in less developed nations open bank accounts, which helps promote economic development.
- A remittance is money that is sent to another party, usually one in another country; typically the sender is an immigrant, and the recipient a relative “back home.”
- Remittances reached a record high in 2018, according to the World Bank.
- Remittances represent one of the largest sources of income for the population of low-income and developing nations, often exceeding the amount of direct investment and official development assistance.
Examples of Remittances
For low-income countries or countries with struggling economies, remittances represent one of the largest sources of income for the native population. In 2015, for example, Mexicans abroad sent over $24 billion back home, which was more money than the country generated from selling oil.
Plunging oil prices and production have also caused much of the Venezuelan population to migrate to other countries over the years. With so many refugees and immigrants living abroad, the result has been a surge in remittances. In 2017, over $1.5 billion in remittances were sent to family members remaining in the beleaguered country.
Special Considerations for Remittances
The methodology that countries use to record the amount of money people are receiving via remittances is rarely made public. While the majority of value transfers occur via web or wire transfers where they can be more easily accounted for, a fair amount of money is transferred in ways that are more opaque.
As a result, concerns have been raised among financial intelligence units that remittances are one of the ways in which money can be laundered or violent activities like terrorism can be sponsored.
7% – The global average cost of sending a $200 remittance, according to the World Bank.
Many authorities are also concerned about the high cost of remittances. Sending small sums is often expensive. To promote transparency, some countries limit remittances to bank wires, but banks are the most expensive transfer channel, according to the World Bank: in the first quarter of 2019, they charged an average of 11% in transfer fees. Post offices charge on average over 7%. The fees can exceed 10% when the destination is in Africa or a Pacific Ocean island.