5 strategies to optimise cash flow when exporting

 

A squeeze on domestic margins, growing competition, a weak Pound and a vast array of support is increasing the attractiveness of overseas trade for many businesses. Whether you are new to exporting or planning to extend your trade into new markets, selling internationally increases the pressure on working capital. David Weatherhead, Head of SME Trade at Lloyds Bank Commercial Banking, shares 5 strategies exporters can employ to help optimise their cash flow.

David Weatherhead

Head of SME Trade, Lloyds Bank Commercial Banking

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  1. Do your research – take time to get under the skin of potential markets and understand how much time is likely to be added to your trade/payment cycles by exporting to them. Consider the reliability and appetite of your customers as well as the best ways of getting goods into those markets, for example, direct to consumer or through a third party, overland transport or shipping – and then work out how that will affect your working capital cycle. Lloyds Bank’s International Trade Portal can provide key insights and market reports to help you.
  2. Review your existing banking facilities – it’s good to take a holistic view of your business, rather than considering your exports as an isolated business stream. How will exporting impact your current banking facilities? Will they cover your costs over an extended period until you’re paid? Are your facilities flexible enough to deal with any delays in payment, for example, if poor weather delays a shipment? Our Relationship Teams work closely with our Trade and Working Capital Specialists to provide you with solutions to make exporting as easy as possible. These could include pre- and post-shipment finance or invoice finance, depending on your needs.
  3. Find cash flow efficiencies – our Working Capital Tool can help you identify where you can accelerate your cash flow through your working capital/trade cycle. By working closely with your customers and your supply chain, you can help create efficiencies that can see you pay your suppliers later and receive cash from your customers earlier. Letters of Credit*, bonds and guarantees or bills of exchange are invaluable trade instruments that can help you manage your international trade more effectively.
  4. Manage the risk – credit insurance provides an extra layer of comfort, particularly if you’re exporting to challenging markets or those where greater levels of security are required to underpin your trade facilities. UK export finance provides a number of guarantee/finance options that can enable you to access enhanced working capital support. Letters of Credit* and Documentary Collection can also remove some of the risk from your exporting plans. All of Lloyds Online Trade operations are UK-based, so it’s easy just to pick up the phone and speak to our team about what’s happening.
  5. Keep an eye on your cash – you need to be on top of your trade cycle, checking whether payments have been received, and whether goods have reached their destination. Lloyds Online Trade Services helps you manage the process and, together with our online banking platform, gives you control and visibility over where your money is. It’s also worth thinking carefully about your pricing strategy when you’re exporting, making sure you take into account the additional costs of borrowing, transport etc. Our International Trade Portal can help you identify costs and build those into your plans.

“For those looking to explore new markets, there has never been a better time to export,” says David Weatherhead, Head of SME Trade at Lloyds Bank Commercial Banking. “There is a great deal of support available and so many solutions that we, as a bank, can offer to make exporting as straightforward as possible and to help you manage and optimise your cash flow through international trade.”

*Documentary Letters of Credit are subject to internationally agreed banking rules (ICC Uniform Customs and Practice for Documentary Credits)

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To discuss how we can support your business by making more of its working capital, please speak to your relationship manager or email us

 
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