Next year’s World Cup will start in the middle of June and end in the middle of July. No matter what country you live in, you can bet that this event will receive endless coverage in which every kick, move, save, and goal will be heartrending.
Next year’s World Cup will start in the middle of June and end in the middle of July. No matter what country you live in, you can bet that this event will receive endless coverage in which every kick, move, save, and goal will be heartrending. Although the ancient Mayans played a similar game of soccer, in which the losing team was put to death, fortunately in our times no player is going to lose their life over losing a game. However, for thousands of companies world wide, the World Cup is their financial soccer event that can yield tremendous profits or disastrous losses.
The number of companies in the areas of sporting goods, entertainment, logistics, travel, accessories, and food alone are in the tens of thousands both throughout Brazil and abroad. Although for many companies being a part of the supply chain of products and services can be the opportunity of a life time, it can also end up being a very tough business situation. In addition to the unusually long payment terms that many suppliers are required to provide, a small quality product error or just a slight delay in the delivery time could sink even a well established company. Unfortunately, mistakes will happen, oversights will be made, and losses will be incurred.
So what does the 2014 World Cup in Brazil mean to your company?
1) If your company is getting directly involved in selling your product on credit to the World Cup Organizers, if at all possible, make sure that your payment terms are as short as can be expected. If you have to extend payment terms in excess of 90 days then be sure that the amount you are selling is less than 1% of your total sales since events like these can end up taking over 180 days to ultimately pay.
2) If your company is selling to a supplier who is in turn selling to the World Cup Organizers, then make sure that your payment is not going to be contingent upon your customer getting paid from the World Cup. Or, if you are willing to wait, as in point (1), make sure that you can comfortably weather the delays in getting paid.
3) If you’re selling significant amounts directly to Brazilian companies then do your due diligence. Purchase credit reports that will provide verifiable financial and legal information on the company. The last thing you want to know is that the company is operating on a shoe-string budget and has many law suits against it. Background checks on the executives or owners would add another layer of comfort in knowing with whom you are dealing.
4) Make sure your contracts are in good order. Have a Brazilian attorney, who is also fluent in English, review all documentation to make sure that there are no oversights or loopholes.
5) Think in terms of having credit insurance to safeguard your receivables, whether you are selling directly to the World Cup Organizing company or to the suppliers. Credit insurance will be a wonderful safety net in the event of a payment default or bankruptcy. The 2014 World Cup in Brazil will undoubtedly be one of the most intensely watched and cheered events and I hope that through careful credit planning, your company’s success will be a part of all the wonderful excitement.
Octávio Aronis, Attorney