Manufacturing or distributing the myriad products that are used within the equestrian and country industry can often be international work. But running an import-export business can be complicated and laced with risks, especially if yours is a small company. Here Camilla Bellhouse, Head Trader at global online early payments network URICA, gives her top tips for managing those risks and keeping your international trade thriving. Half funded by the UK government, URICA (pronounced eureka) provides advance payments between businesses and their clients.
- Stay Organised – When dealing with trading partners in multiple regions, efficient organisation and administration are key. Online tools can be excellent for this, from simple to-do list apps such as Wunderlist and Things, to online invoicing platforms. Sending and receiving invoices over email can be onerous when you use your email accounts for multiple purposes. Using an online payments network keeps all of your payments administration and communication in one separate place, with the added benefit of working seamlessly across borders.
- …But Flexible – Working with numerous clients and suppliers internationally can also mean encountering and managing different cultures and preferences in doing business and completing transactions. It’s important to stay adaptable, and to work with clients regarding their preferred methods of delivery and payment, in order to avoid damaging relationships that are important to your company’s success.
- Minimise Currency Risks – There are many organizations that support selling services, products or talent overseas, and you needn’t be at the mercy of currency exchange rates when handling the many moving parts involved with your import-export business. With advance payment platforms such as URICA, you can choose the currency you would like each invoice to be paid in, and also the timing of your payment, managing the risk that exchange rates may swing out of your favour.
- Manage Credit Risks – Effective credit management can help your company stay competitive. With four banks responsible for 80% of lending to SMEs, U.K. businesses have had few financing options. But when the government set up the British Business Bank in 2013 it fired up some new players like us to break the banks’ stranglehold on business finance. We don’t require any personal guarantees or assets to be put up as security when we give our credit terms, we simply check that the company making the payments is credit-worthy, and charge a fee for using the platform that is in most cases between 1 and 2% of any given invoice value.
- Keep the Cash Flowing – Cash is king, goes the adage. Indeed, it has been estimated that around 39 billion pounds is tied up in late payments of invoices between businesses at any time in the U.K. You may be perfectly profitable and have a number of payments pending and new clients in the pipeline, but having a solid pool of working capital at hand will always help a small business manage costs when payments get delayed for any reason. If you’re exporting, you may wish to receive payment before parting with a lot of valuable product. When we facilitate the payment of an invoice, we take on all the risk of late- or non-payment on that transaction.
In the years since the financial crisis, access to credit for small businesses has been plagued by the risk-adverse lending environment, leading to the need for the applicant to put up security and lengthy bureaucratic processes; businesses being told to wait eight weeks for credit – when they have 12 to fulfil a big export order. The chronic nature of the problem is thought to be causing a growing number of firms to become “permanent non-borrowers”, with the SME Finance Monitor from BDRC Continental showing that 48% of SMEs are classed as PNBs.
When the banks created invoice financing offerings to help companies release capital tied up in late payments without having to borrow, their services were expensive at best, and damaging at worst. What with sky-high costs and insensitive chasing of unpaid invoices, third party invoice financing become something of a dirty word. In a 2009 survey, 63% of business owners said they would not consider going to a bank for help with invoice payment. But the new networks springing up are a different, more efficient and risk-taking breed.
So before you go to a bank to help improve your import-export business, consider the other options, which may not only save you money, but have added administrative benefits too.