The 2014 Budget was compelling for a number of reasons, with one of the most important announcements made by Chancellor George Osborne being his intention to double the level of export finance funding he provides to businesses in order to bolster the manufacturing industry and transform the UK into an exporting giant. The Chancellor also said that he will lower the interest rates and borrowing costs on the export finance he hands out to business in order to make the £1 trillion export target he has set for 2020 manifest in reality.
Clearly there is huge potential for businesses in the upcoming years to expand their businesses across the globe and market their product to a worldwide audience. Only last year, the export statistics to the EU for the UK exceeded £150 billion, further illustrating the rewards that optimising your export practice can have on your levels of company profit. It seems increasingly likely that the financial stability of a number of businesses will depend on how well they adapt to the global market, and exports levels will continue to rise in importance, particularly if the country decides to leave the EU. However, businesses have continued to be hit with the same obstacles of structuring their logistics in order to fully capitalise on the export market; however great the fiscal reward products still need to be delivered to the correct individual in the right geographic area, at the right price.
These problems extend further and businesses should take the following five factors into consideration when contemplating building their global empire in order to maximise their chances of success and optimise the returns they obtain on their investment.
There are a multitude of potential problems that could arise due to insurance issues but the reality is that for any business hich aspires to crack the global market and maximise their profit through exports, making sure that their goods are appropriately insured is one of the most pivotal areas to address right from the outset. There have been far too many businesses in the past who have opted to minimise their expenditure on insuring their stock and have subsequently suffered huge losses after problems arose during the exporting process.
If you want to crack the exporting business then you will need to make sure you buy insurance which covers against both lost and damaged goods during transit and also protects you financially if any political or economic unrest rises somewhere along the supply chain. So get the right insurance advice.
Political unrest, natural disasters, reforms to law, import restrictions and other extenuating circumstances in any country along your supply chain can subject exporting businesses to a great deal of risk, because they are essentially being faced with obstacles that they did not know they would encounter. It only takes one country within your exporting supply chain to collapse in order for your entire network to begin crumbling and any import restrictions could adversely impact your own cash flow situation.
As such, it is essential that when choosing which places to export to that you do so wisely and selectively and thoroughly research the stability and laws of the country in question before committing to anything. Choosing a partner who resides in the country you are exporting to would be wise because they would have a more insightful understanding of regional markets, local tax laws and customs and other cultural areas related to business which could raise problems for your business in the future.
One of the big areas that cause the greatest level of apprehension amongst exporting UK businesses is about payment from the importing party. Exporting is only worthwhile if you stand to profit from it and this makes it of paramount importance to take measures right from the start of conducting international business to minimise your risk of not being paid. In particular, it is pivotal that you seek help regarding the UK Export Credit Guarantee Scheme and see which measures that the Export Credits Guarantee Department (ECGD) suggest to you in order to ensure you are paid on time. Moreover, you will want to consult with them about how you can attain protection against exchange rate risk, which has in the past resulted in businesses experiencing a severe reduction in the amount of profit they generated from exporting.
It is well documented that you can receive detailed help as a company director from the ECGD about these matters and this should have a significant impact in ensuring that you are always paid in time and are not subjected to lengthy and costly payment disputes in the future.
As your exporting business expands, it may become increasingly hard to uphold efficiency levels, particularly if you do not take measures to ensure that your supply chain is fluid, well managed and regulated. One of the most important things you should ensure is that the freight forwarder you choose for your exporting maintains clear visibility across the chain and sets up a meticulous and thorough tracking process so that you can monitor the movements of your goods right the way through their journey.
An often neglected potential problem is that of disputes in the future with trading partners and you will have to ensure that your presiding freight forwarder is adept at resolving issues and representing your company. Optimising the logistics of your business by establishing a powerful network can assist with mediating any potential problems, manage the flow of goods and help make sure that the disputing parties reach a satisfactory arrangement so that the working relationship is upheld.
Image courtesy of Vichaya Kiatying-Angsulee / FreeDigitalPhotos.net
Written by: Mike Smith