Colin Walls: Managing cash flow when exporting

The export market is hugely important to the Scottish economy and it is crucial that we continue to grow and develop this key aspect of our economy.

Colin Walls, head of trade and working capital at Bank of Scotland

Earlier this year the Scottish Government signalled just how important when it set an ambitious target for Scottish businesses to deliver a 50 per cent increase in the value of international exports by 2017.

New markets give businesses fresh opportunities to grow and increase revenues, but they also present a number of new risks and challenges.

Having customers overseas can often mean longer delivery times and longer gaps between ordering and payment, which can increase pressure on a business’ cash flow.

Of course, consistent cash flow is crucial for any business whatever their activity, but when you add exporting to the equation it becomes even more vital.

But businesses shouldn’t miss out on the growth opportunities that can be found in foreign markets just because of concerns over risk.

Beginning to trade overseas or to significantly expand that trade requires a comprehensive evaluation of how working capital and cash flow will be affected throughout the entire trade cycle. At Bank of Scotland we place a great emphasis on spending time with our clients, building a timeline assessment that covers a customer’s full trade cycle, including where they are buying from and selling to which highlights the key risks for a business and also establish whether there could be a potential funding gap.

The trade cycle analysis is the key to our understanding, as it better provides a range of options and ultimately the best solution possible for a business, while supporting its long-term growth and sustainability ambitions.

We place a great emphasis on providing bespoke solutions for our customer’s individual needs, bringing in specific experts and teams to support overseas ambitions based upon our assessments, in both risk management and working capital solutions.

We have an experienced team in Scotland and partner networks in more than 100 countries to provide the support UK businesses need to grow internationally.

To support prompt payment for exported goods, or receiving imported goods on time, there are a number of risk management solutions, such as providing letters of credit to guarantee payments will be received on time, supporting a company’s ability to perform under contract and underpinning new business wins.

Fluctuating foreign exchange rates are also a potential pitfall and can turn a healthy profit into a loss, but again a good banking partner can help mitigate against these challenges.

Flexible, responsive finance is crucial to addressing the additional pressure that international trade can place on working capital both before and after shipment.

Working capital solutions can help plug any funding gaps with supply chain finance, to extend payment of key procurement costs, pre-shipment finance to provide capital to produce and ship goods, post-shipment finance to support extended credit terms or better structure sales contracts for a more profitable outcome.

What these typical solutions show is that businesses trading overseas need comprehensive, specialised support from a bank that truly understands its global trading needs.

Colin Walls is head of trade and working capital at Bank of Scotland