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Top Tips for Exporters

Selling products and services overseas can be fraught with complications for small exporters. Work with your bank and other partners to avoid payment pitfalls, advises Noorhayati Han, Head of Trade and Supply Chain, HSBC Brunei.

  • Protect against risk of defaulting customers Many exporters underestimate the risks of extending credit to overseas customers. It can be difficult to learn about buyers or their reputations and difficult to obtain financial data if they are not a publically listed company. Exporters should consider protecting or insuring themselves against the risk of default by customers with risk mitigation tools such as documentary credit.

  • Partner with an international bank

Granting open account credit is sometimes essential to getting orders, but how do companies get overseas buyers to pay when there is no underlying bank guarantee? Partnering with a bank that has offices in the exporter’s country as well as the buyer’s country can be advantageous, particularly since the bank will have staffs who speak the local language of the buyer and understand how business is conducted in the buyer’s country. The bank can help you determine a reasonable credit period while avoiding customers’ unreasonable delays.

  • Be sensitive to local business culture

Understanding the culture of the buyer’s country, including the un-stated business rules, can make all the difference between getting an order and failing. Do not underestimate the differences in culture – for example, even in Chinese speaking countries or territories like mainland China and Taiwan there are subtle differences in both language and customs. It’s better to get advice from trusted resources either located in the buyer’s country or specialists providing intercultural training on business effectiveness. An international banking partner, like HSBC, can also help.

  • Keep proper records

Businesses should ensure that the whole order/invoice cycle is properly documented so there is clear evidence of what terms have been agreed with suppliers and customers and to assist in resolving any conflicts that may arise. Exporters should conduct detailed and candid discussions with their customers about terms and payment processes early on. It is also a worthwhile investment to obtain legal advice to ensure the exporter’s

interests are protected and that all parties can reasonably fulfil conditions.

  • Be prepared to deal in foreign currencies Is the buyer apprehensive about the cost and risk of dealing in a foreign currency? It may be better to quote prices in the buyers own currency. Even though this shifts the foreign currency risk to the exporter, there are more ways than ever for the exporter to manage that risk cost effectively, thus ensuring their terms appear at their competitive best. For instance, the exporter can arrange a foreign exchange contract, which allows them to buy or sell a specific amount of foreign currency at a certain rate on or before a certain date, to protect their business against future currency fluctuations, or open a foreign currency account to make and receive payments.

  • Be flexible over finance

Exporters have to balance the interests of the buyer with those of their own. The more risk the seller takes on the easier it is for the buyer to purchase. With the right financial partner those risks can be managed to maximise sales opportunities at an acceptable risk. One common risk management tool is marine cargo insurance, which can be tailored to suit a company’s particular needs.

Above all, after products have been delivered to the buyer, collecting payment should be an exporter’s top priority. How quickly payment is received will depend on the format in which the money is remitted and how prepared the receiving bank is to process it. Banks offer a range of collection options for businesses. Frank dialogue with a bank is crucial – for exporters or buyers – in order to identify the right solutions, from financing to risk management to collections. With the right banking structure in place, cash flow is more predictable, financing decisions are more informed and risks associated with international trade are minimised.

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