How to get your export business on the path to positive cashflow

Cashflow is one of the biggest challenges businesses face when exporting. Payment cycles can be very long, and you need to plan carefully to ensure your business has sufficient cash to cover multiple costs. Securing a source of cash to help support your export business growth can be difficult.  

The challenge of accessing cash

Finding customers is only one of the challenges in expanding an export business. As an exporter, you will also need enough working capital at hand to keep the business moving while you are finalising your export contract or waiting for payments.

To minimise cashflow issues, you should consider protecting your business with strong contracts and favourable payment terms. For example, you may choose to ask for an upfront deposit, interim payments and shorter payment periods. If you’re exporting for the first time, make sure that you work with experts in the field such as your accountant and lawyers, to ensure that you are aware of any potential issues.

There may be times when you need to rely on external finance to ensure you have access to working capital to keep the business going in between payments. If you’re looking for a loan, you are most likely to speak to your bank. However, your bank may not always be able to assist: you may not have the level of physical assets needed to use as security against a loan, or maybe you’re exporting to an emerging market with a high-risk profile. 

What’s more, your earnings profile in international markets could be variable. This could discourage banks, who may rely on your historical financial records and performance to build a risk profile for your business.

Managing working capital while growing

Going through a high growth phase can increase challenges as this could create significant working capital shortfalls. 

For instance, an overseas customer may award you a much larger contract than the value of your domestic business. That’s great news, if you are ready to grow your company, but it could also mean that you’ll need more capital to hire extra staff or to order more stock from suppliers to meet increased demand. 

If you’re negotiating a contract with an international company, especially one that’s larger or more experienced, the terms of payment may not be weighted in your favour. It may be difficult to get an advance payment from your buyer, or you may need to wait for a long time before you receive any payment at all.

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.

Managing international payments

Even if you’ve got a successful track record of managing cashflow while doing business locally, managing international payments comes with its own risks. These may include country or political risks, currency risks, corruption, risk of non-payment and more.

How to get positive cashflow

Managing the cashflow challenges of exporting can be daunting. On the plus side, being an exporter opens your business to a world of opportunities, including:

• A significantly larger pool of customers to promote and sell your goods or services to
• More diverse markets can help you increase your competitiveness and mitigate risk
• Increased economies of scale
• The potential to increase your profits.

The key to exporting successfully is to understand and manage your risks. That way, you’ll be able to make the most of the opportunities, and be on the path to positive cashflow. 

For more information on how you can manage your export cashflow, download Efic’s free Five ways to manage your export cashflow eBook.