A Guide to Export Risks
These are hard times for everyone, but many UK businesses are surviving the financial crisis by taking advantage of the weak pound and selling to overseas markets.
While exporting can increase sales though, there are risks and costs involved in selling overseas which can be disastrous for your cash flow.
Timely payment is essential for the survival and development of your business, so we’ve put together this simple six-step guide to help you on the way to successful export growth. We hope you find it useful.
1) Carry out a full risk assessment at regular intervals – not only when handling enquiries or orders from new overseas buyers, but also to minimise the possibility of potential default by existing clients. These are tough trading times, and even the most reliable of buyers may come up against difficulties.
2) Make sure that the buyer is creditworthy. A wide range of financial information is available from credit information agencies and major credit insurers.
3) It is advisable to assess country risk too, particularly given that problems can arise very quickly in territories where the political or economic environment is volatile, or where trade or currency restrictions are imposed.
4) Watch out for payment terms. International payment terms can represent a significant financial challenge, particularly as many overseas buyers insist on credit periods well in excess of 60 or even 90 days. If you are sourcing raw materials, components or finished goods, such terms can put tremendous pressure on cash flow, particularly if supplier credit periods are less generous.
5) Consider bank risk. One major consequence of the global credit crunch has been the resurgence in use of guaranteed payments such as Letters of Credit. Whilst this remains a popular and secure method of payment for companies trading in difficult markets, the current instability within the global banking sector means that you should carefully assess the strength of a bank providing such guarantees. Also, more secure methods of payment can result in significantly higher costs, which should be quantified in advance in order to protect profit margins.
6) Make sure your staff are trained. It is vital that all key people involved in export transactions are equipped with the necessary skills and knowledge in order to minimise unnecessary and unexpected costs. A good training company will understand your markets and work closely with your key people ensuring that you increase sales and profitability with minimum risk and cost.
Let us help you to achieve your export growth targets and obtain the best results for your business.
We can help you.
Call us on 0800 043 4052 or email us to discuss your requirements.