Manage cash flow

How to avoid cashflow challenges when exporting

View transcript for Episode 8 - Avoid cashflow challenges when exporting recording
Cashflow can be a significant challenge when exporting. So it’s important to manage it carefully. Let’s look at some of the risks and the impact they can have.

Fluctuating exchange rates between sterling and other currencies can alter profit margins.

Long shipping times and customs delays are not uncommon and can alter when you receive payment for products. So you need to plan for this eventuality.

Political instability and natural disasters can potentially slow down delivery, even if your destination country is not affected. Research your market to know if insurance provision and risk management procedures apply.

Language barriers can cause cashflow problems. Local staff dealing with payments within your export country may not necessarily speak English, which may slow down communication. So it’s important to establish a relationship early on and translate requests as best you can. Equally, when exporting to a new region, you may have to pay an unexpected local tax. So it’s worth doing your homework as much as you can.

Plan your cashflow. Once you’ve considered these factors, it’s time to create a cashflow forecast to help you decide if you can comfortably cover running costs, or whether you require finance such as bank guarantees and bonds to cover any funding gaps. Or perhaps additional finance such as a line of credit or export invoice finance?

What you’ll learn

  • the areas that could cause you issues
  • how you can manage your cashflow
  • some of the available funding options

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.

When it comes to exporting, planning your cashflow and understanding your finance options in advance are key – or you may find yourself with a serious shortfall in funds.

International trade adviser

Share this page

  • Email
  • Facebook
  • X

Accelerate your learning

Sign up to Great.gov.uk and you'll be able to:

  • track your learning progress and read case studies
  • join live events from the UK Export Academy
  • compare markets using live export data
Sign up to get started

Already signed up? Sign in

Something went wrong. Please try again.

Was this page useful?

Thanks for letting us know

Can you tell us why this page was useful?

Do not share any personal or commercially sensitive information.

Cancel

Thanks for letting us know

Can you tell us more about your feedback?

Do not share any personal or commercially sensitive information.

Cancel

Thanks for your feedback