Starting to trade internationally can be a scary leap from the comforts of trading at home for the owner of a small company. Here, Rachel Mainwaring, operations director at Creditsafe, givesreaders ten essential tips to provide an understanding in the most essential areas of international trading.
The growing capabilities of ecommerce, mobility and technology in international markets mean that doing business on a global scale is now more accessible than ever. Company owners are no longer restricted to operate within the contours of their home country.
The global interlinked economy we see today is only likely to become further intertwined. The Office for Budget Responsibility expects UK exports to hit the 850bn mark by 2020 a figure that looks even more exceptional when considering international trading with EU and non-EU countries sat at just 224bn in the UK at the turn of the decade.
When working with international clients and companies, it’s not just about securing the biggest and best deals for your business: you also need to know how to get paid and who you’re doing business with.
International trading can bring great rewards, but it pays best to enter new markets with eyes wide-open. With an increasing number of UK business owners considering trading with partners who operate in EU and non-EU countries, it’s important to minimise risk.
Whoever you choose to do businesswith, here are ten top tips to help make trading overseas as simple as doing business at home.
1. Credit checking
Company owners taking their first steps in doing business overseas or simply with organisations within a mixed group structure will reduce their exposure to risk by being as well informed as possible about the customers and suppliers they are dealing with.
Carrying out a credit check on every business before starting a relationship can significantly reduce the risk involved.
Credit reports cross reference and present company information in a simple format to make the lives of credit managers and controllers much easier, as they can quickly analyse the risk of doing business abroad.
A company can use credit reports to check, before agreeing a commercial deal, that the company is solvent and not part of a failing parent group.
2. Monitor payment behaviour
One of the most important things to take note of on a credit report is a company’s payment behaviour. If the company consistently pays its suppliers late or can’t afford to pay its bills, it could in turn affect your business.
Having access to this information will help you decide whether to trade with the business. If you do proceed, set payment terms and methods accordingly to ensure your business is not affected negatively by potential late payments.
3. Understand the culture
Make sure you understand the culture of other countries first. They may have different guidelines or beliefs to more Westernised countries and certain customs may need to be followed.
4. Understand the currency and tax regulations
This can often be a cause of confusion and can create barriers to efficient trading. Make sure you know what the currency exchange rate is before you set your prices and be aware that tax is different in every country.
5. Check the group structure of potential traders
It is always helpful to have a broad picture of the business that you are dealing with. By checking the group structure and which other companies are under the corporate umbrella, you can see how big the organisation is as a whole.
6. don’t underestimate the cost of shipping
If you are planning to ship your products overseas from your home country, don’t underestimate the cost of shipping.
Research how much it would cost you to ship before advertising the price of shipment to your customers.
House of Lords trade minister Francis Maude has announced that the government is to take a new approach to boosting exports by focusing support on key industries the UK has a strong competitive advantage in. more»
Just five per cent of small businesses in Britain have plans to start exporting abroad in the next five years, leaving a potential shortfall in the economy of 141.3bn, according to a new report commissioned by money transfer company World First. more»