Manage cash flow:How to avoid cashflow challenges when exporting

Managing cashflow

For a new exporter, having enough cash to establish yourself in an export market can be a significant challenge. 

Do you understand the factors that can affect your cashflow? Is there enough working capital at hand to keep the business moving while you’re shipping or waiting for payments? Do you have the funding, people and equipment available to deal with the big order you've just landed?

Understanding the risks

Here are some ways to prepare your business for any potential funding challenges - helping you safeguard your business and minimise risk. 

Currency fluctuations

Currency markets can be volatile. Fluctuating exchange rates between sterling and the currencies you trade in may have a noticeable effect on your cashflow. You should do what you can to plan for and manage changes in exchange rate.

Extended shipping times and payment terms

Shipping times are lengthy, customs delays not uncommon and payment terms can be longer than in your domestic market – meaning your invoices take longer to get paid. Research conditions in your market and plan accordingly.

Language barriers

Although many business leaders around the world speak English well, this is not necessarily the same for local staff dealing with payments. Establish a relationship as soon as you can and translate your requests as best you can.

Local business culture and practices

When you start exporting into a new region you may find you have to pay unexpected local taxes or face delays because of regional bureaucracy. Do your homework and find out as much as you can before you start.

Political instability and natural disasters

Political instability, conflicts and unforeseen natural events occur all over the world, and even if your destination country is unaffected your shipping routes could be. Research your market to know if insurance provision and risk management procedures apply.

Plan your cashflow

Know what resource is realistically available for any new export venture, and what is still needed for the current business. Align your export strategy with your overall business plan and include your budget, operational model and any partners you may have.

Create a cashflow forecast, factoring in all outgoing spend, incoming revenue and expected payment dates. This should help you decide if your business can cover its running costs or if you need finance to cover funding gaps.

Know how to get funding

To avoid a funding shortfall it’s important to understand the financing options available. Bank guarantees and bonds can help to bridge the cashflow gap between paying your suppliers and receiving payment. Or you may need to seek out additional finance such as a line of credit, export invoice finance or a short-term loan.