Trading internationally poses several key challenges that are not present with domestic trade. One of these challenges is securing additional financing which is needed to accommodate delays that may arise while waiting for the supplier. On top of that, there are a few considerable risks, including ordered goods which do not arrive as well as the hassles associated with using foreign currencies. How do you overcome these? Here are some import finance best practices that can help minimise the risks involved and enable you to strengthen your trading position. Set clear objectives Before engaging in international trade, you have to bolster your negotiating strength. Simply put, when you are dealing with a larger business, you may have to make a few accommodations. Be aware of pertinent laws and regulations in the country of your trading partner. You should also thoroughly evaluate the financial capability and trustworthiness of your trading partner as well as the business climate in the country you are trying to get into. When you are looking for a viable payment method, it is highly advisable to invest in the establishment of a solid system rather than doing that as a one-off endeavour. Choose an appropriate payment method Here, there are several options that you and your trading partner may want to consider. Before making a final decision, you need to carefully evaluate the pros and cons and reach an agreement with your trading partner. Open accounts are highly favourable to customers because the importer bears essentially all the risks involved. In order to minimise these risks, this type of payment should be used with established partners. Also, you and the other party should be clear about the credit period. If you want to reduce the risks while ensuring that your customer will be held legally liable for failure to perform his end of the deal, consider documentary collection. Should the customer fail to pay the bill, you will have a strong legal position. Advance payments are ideal for new customers and low value transactions. Here, most of the risks are shouldered by the customer. Documentary credit, on the other hand, entails making arrangements with a bank. Here, the bank will pay you upon getting the necessary paperwork within an agreed-upon timeframe. Documentary credits may also be used to raise finances. Whichever payment method you choose, you and the other party must agree on how the funds will be transferred. Price negotiation In drawing up the contract between you and your trading partner, remember to outline the responsibilities of each party, including those related to transportation, insurance, payment method, credit terms, administrative costs, bank charges, and taxes. Using foreign currencies As an importer, you will be able to find more suppliers if you are flexible enough to pay in their local currencies. This will also enable you to negotiate for better prices. The easiest way to manage foreign currencies is to open a foreign currency account with your bank. You may also want to open an account in a particular country where you have multiple trading partners. Using foreign currencies carries the risk of fluctuation. In order to protect your business from that risk, you can specify in your contract the use of a fixed exchange rate. Financing In order to cover the financing of your imports, you can use loans and overdrafts. However, you might want to consider getting help from the international trade department of your bank in order to secure good interest rates. Your bank can also help you compare and choose among different types of financing available. Source: business.hsbc.com.qa provides some great solutions if you want to enter the importation industry.
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Though there are business owners who want to keep their operations small, this does not mean that all of them do not want to grow and expand their business. If you are among those who are eyeing business growth and expansion, be reminded that it is not enough for you to have a long-term vision – you need to have a tangible plan. Steps You Can Take To Grow Your Business Today Know what sets your business apart – You must determine what your value proposition is and what sets your business apart from your competitors. Moreover, you must know the reason why your clients are choosing you over the other companies that offer similar products and services. Bear in mind that companies often compete differently. Some will offer lower prices in order to outpace the competition while others anchor their success upon authority. Whatever your strategy is, your value proposition must be something that only your business offers. Once you let go of that value proposition, there will definitely be a risk that your firm’s competitiveness will be weakened. Determine your target clients – Companies thriving over the long term do so by offering solutions to a particular problem. Although it is very enticing to pursue each possible client that you may come across, this will only spread your resources thin. In turn, it can leave little value for actual customers who can benefit from your products and services. Hence, it is very crucial for you to have a clear understanding of who your ideal customer is. Identify the key indicators of growth – Growth will entail making significant decisive changes. But not all changes are worth it. Hence, you must determine what changes will bring about real growth. In order for you to determine the right answers to that, you must know the crucial indicators that will influence growth. After determining those, you must funnel your resources to those. Figure out other possible income sources – Added revenue streams can help make a business very profitable. But there are some revenue streams that are unsustainable over the long term. Also, there are products and services that might seem great at the onset but don’t bring relevant revenues. Get hints from the competition – Even when you are beating the competition routinely, there are different areas where your competitors are doing things right. Hence, you must look what other players within your industry are currently doing. After that, evaluate their decisions and learn some insights from their success. Get help from the right team – Your greatest assets are your employees due to the fact that they are in contact with your customers and are accustomed to their needs. If you don’t have enough funds, you can actually cut back on some luxuries and expenses. Funnel such funds toward the development as well as the compensation of your employees. |
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