21/07/2015

By Andrew Charnley, Head of Trade & Working Capital at Lloyds Bank Commercial Banking for London and the South


As the latest ONS statistics show, more UK companies are making decisions about whether to export to global markets. In the three months to May exports were up 2.6 per cent, so it’s more important than ever for businesses to get a truly complete picture about the world of exporting. No matter how prepared you are, rarely do first-time exporters cover all the bases.

As many business owners will know, getting paid on time in their domestic market can be challenging, but when your customer talks a different language and resides in another time zone, the risks are even greater. Many exporters discover this challenge having had a bad experience, rather than making preparations for it in advance. This can lead to a crises of confidence for the exporter and in many cases, actually deters businesses from furthering their overseas client base.

Ensuring that payment terms with their trading partners are clear and beyond reproach, should be the first action that a business takes for new export clients or market. Equally there are internationally-accepted payment instruments available that provide security, such as prepayments and letters of credit. Every budding exporter should become familiar with these to ensure they have addressed both reducing the inherent risks and in most cases arranged suitable working capital provision. You may have scouted an ideal overseas market, but if you don’t get paid for your goods, then you’ll never reap the benefit.

At some stage, it makes sense for exporters to open an overseas account. If you’re expecting a high level of sales in a particular market, then having an account in that country will make it much easier for those customers to pay you.

However, this isn’t as straightforward as opening an account at home - you will need to comply with the regulations in that country. On top of this, keeping a handle on what is going in, and going out of multiple accounts abroad is an accounting challenge that can overwhelm businesses, particularly the smaller businesses, who may not have a robust financial infrastructure in place. Therefore if exporters want to accurately forecast their cash flow, they’ll need to ensure that they have effective accounting procedures in place and access to advisors who have experience of international markets.

As the Eurozone remains on red alert, all businesses are mindful of currency risks, however the volatility of currencies is still underestimated. Any price you agree now with a trading partner will be affected positively or negatively by exchange rate fluctuations – which happen all the time. Exchange rates float freely against one another, and currencies are traded around the clock. These constant variations make every transaction unpredictable, and every exporter must be aware of the risks and opportunities this brings.

UKTI was founded to help UK businesses navigate these minefields, and earlier this year, Lloyds Banking Group announced a strategic partnership with UKTI, to help increase exports and attract inward investment. The onus is still on exporters to do their homework but this is just one of the examples of available support to help UK businesses succeed globally. More of Britain’s businesses are beginning to look overseas for growth, yet for exporters to benefit, they must account for the full range of challenges first. What is key for exporters, is having strong working relationships with their bankers and access to UKTI for expertise and advice. Ensuring both these building blocks are in place will facilitate successful growth into new international markets.