Barclays on Export Week: Rising to the overseas challenge

EXPORTING can be a real challenge but the potential rewards are huge. Here are some thing you might want to consider.

Resource costs

Before committing to exporting, it’s important to discuss your financial position with your accountant and bank manager.

Entering a new market often requires an increase in finance and manpower, along with appropriate timescales built into your projections.

Customers and partners in high-growth markets, for example, tend to put an essential value on relationships. These take time, so it is unlikely you’ll see a return on investment in the first year.

Legal, regulatory and intellectual property issues

Legal and regulatory issues, along with intellectual property (IP) protection are often the greatest barriers to export success.

All this week Barclays will be writing about various aspects of trading internationally to coincide with UKTI’s Export Week. To read more click here.   

Every country has its own trading, taxation and IP systems that you’ll need to know and adapt to. The value of doing your homework can’t be emphasised enough.

The Intellectual Property Office can help you get prepared for such situations.

Managing overseas risk

Political and economic developments, cyber risks, bribery and corruption are just some of the issues your company will face as you begin to trade internationally or expand into new markets.

It’s important to know who to turn to for support in these instances as James Webber, Head of Trade & Working Capital for Barclays in the Midlands, points out.

“UK Trade & Investment and the Foreign & Commonwealth Office bring together authoritative, accessible and topical online information about the key political, economic and business security issues facing different countries,” he said.

“The more you know up-front, the better off you’ll be.

“From a financial perspective you may also need to consider foreign exchange and interest rate risk to protect your business.”

Language and cultural barriers

Ray O’Donoghue, managing director for Barclays Corporate Banking in the Midlands, says companies need to be sensitive to local ways of doing business, even in different regions of the same country.

“Lack of awareness and knowledge of cultural norms can be an all-too-real obstacle,” he said.

“Speaking the language of your potential customers can quickly establish mutual confidence. If you don’t speak the local language, consider investing in foreign language training or employing a translator or interpreter, especially for your promotional material, to avoid colloquialisms and metaphors that could be incorrect or embarrassing in the local language.”

Research your target to establish local considerations including product or packaging modifications to ensure products conform to local, cultural demands.

You may also find that local sales and marketing channels for your product might be different from those in the UK.

Logistics

International transport can be complicated and getting it right depends on the agreements you have with customers or suppliers. Set out your obligations in a clearly written contract using Incoterms (standard trade terms).

They state who is responsible for transporting goods, insuring them during transportation, paying duties and securing customs clearance. The best mode of transportation is dependent on the type of goods and how quickly they need to be delivered.

In all cases, they need suitable packaging and labelling for transportation. You should clarify in advance who’ll be responsible for UK customs procedures, for freight and insurance, and for customs clearance in the customer’s country.

Getting paid

The risk of late or non-payment can be greater when doing business internationally. Ensuring payment is a combination of assessing risk, settling on acceptable payment terms and methods, and considering insurance to protect your business.

Minimise risk by researching the market conditions in your target country and the creditworthiness of potential customers prior to trade. Help is available from UK Export Finance (formerly known as ECGD).

Making currency work for you

Webber said: “In countries where there are access restrictions to foreign currency, customers may face problems getting the right currency to pay you. In this case, it’s worth insisting on a confirmed, irrevocable letter of credit.

“This secures payment according to the terms of credit at an agreed rate. Businesses that sell on credit can use factoring or invoice discounting to free up cashflow.

“Export factors specialise in the collection of money from overseas, paying you a percentage of the invoice up-front with the balance (less their percentage) paid once payment is collected.”

As part of its own activity during Export Week, tomorrow (May 20) Barclays is hosting a webinar on trends and solutions in export finance, helping firms to maximise their international trading potential.

The webinar runs from 08:30-09:15 and it is free to register.

To find out how Barclays can support your exporting ambitions, please contact James Webber, head of trade & working capital in the Midlands on 07766 362470 or by email at james.webber@barclays.com