The press is rife with stories of a potential recession, the current financial crisis has yet to reach its conclusion, and additional environmental pressures are looming upon us. Uncertainties about economic growth and inflation continue to run rampant, bringing with them additional challenges to businesses trading overseas. Consequently, it is not just the UK economy, but also the currency fluctuations across Europe and around the globe, which can affect import and export business success or failure.
In such an economic climate, businesses need to take stock of their situation and ensure relevant measures are in place to weather the storm. For those trading fresh produce, the building and maintaining of business relationships within supply chains is more of a focal point than ever. As a result, businesses need to ensure financial processes for trading nationally and internationally are robust.
A recent study by Travelex Global Business Payments among UK businesses involved with international trade found that, on average, UK businesses trading internationally make and receive around 201 foreign payments and 669 domestic payments each month (research carried out by Harris Interactive for Travelex Global Business Payments in April 2008).
It also cited the biggest barrier to trading overseas for these businesses was the time payments take to clear, with nearly half of businesses (44 per cent) saying the time taken for payments to clear was a major problem.When facing so many other economic challenges, business leaders cannot afford to waste time or money and, unsurprisingly, the major impact this has on cash flow is one of the top concerns for more than a third of companies.
For those importing and exporting fresh produce, ensuring payments arrive at the right destination at the right time is imperative. Any delay due to a missed or missing payment could prove disastrous and have a detrimental knock-on effect throughout the supply chain - a vehicle unable to deliver freight for an additional day or two until a payment clears into an account could render the produce useless if it is past its best and unsuitable for the end customer, impacting on both time and money for all involved. Such instances could severely damage the relationship between the businesses involved and may also provide an unexpected opportunity for a competitor to jump in and benefit from the situation - impacting on both finances and relationships. And in this volatile climate, solid relationships are vital.
While there is little doubt that the systems available to businesses for making global payments have improved enormously over the past few years, as with any form of financial transaction, errors do occur and the more links in the supply chain, the more costly these errors can prove. The most common reasons for these problems include: manual errors, which could be put down to a simple language barrier or simply difficulties with the lengthy I-BAN identifiers; straightforward ‘missing payments’, where payments get lost in the international banking network; and technological faults.
Such errors in international payments are costing UK businesses almost £100 million every year (Travelex research was conducted by Maven Research in September 2007 among a representative sample of 300 businesses from the insurance, pharmaceutical, travel, education, publishing, and electronics and media industries), as companies are forced to waste time and money chasing lost or delayed payments - and for those dealing in perishable goods, time is of the essence. Even a one-day delay could render produce useless and, with an often long journey and a streamlined logistical timeframe, there is simply no room for error caused by a delayed payment.
Our research found that although most errors are spotted within 24 hours, a small minority take more than a month to come to light, and the clear majority of businesses said it was their bank’s fallibility that led to mistakes occurring, rather than their clients’ bank or another foreign exchange agency. As far as resolving issues is concerned, the vast majority of these businesses are able to sort out the discrepancy within a week - but for a worrying number the process can take much longer, which is an untenable situation for the supplier of, and customer waiting for, delivery of their goods.
The answer to these problems lies in using a specialist payment provider who will have the knowledge and expertise to:
• Manage your payments proactively
• On becoming a client, offer advice on potentially confusing areas such as Anti Money Laundering regulations, forward contracts (allowing businesses to lock in an exchange rate today for payments or receivables they are expecting in the future), international wire transfers, foreign currency drafts and remote draft printing
• Ensure your payment needs are properly understood
• Make the payments process simple and easy for you
• Put you in control of your business payments.
In addition to these, a solution has recently been launched - GlobalPay. This is an innovative online payments platform providing businesses with a single secure point of entry to manage their global payments. By improving visibility of cash flow, reducing currency risk and streamlining the international payment process, it can dramatically cut the amount of time businesses waste reconciling and chasing payments - ensuring any problems are picked up and resolved at the earliest opportunity, and for fresh produce suppliers and their customers, ensure fresh produce arrives to schedule and standard.
Additional benefits are that the new technology enables businesses trading in more than one currency to manage payments and reconcile balances in most traded currencies quickly and easily, faster payment delivery and the opportunity to reduce the cost of international payments by up to 60 per cent, by avoiding the fees associated with routing payments through multiple intermediary banks to reach the end beneficiary.
By identifying challenges and opportunities faced by those in the fresh produce sector, the smartest exporters will be well equipped to succeed in the stormiest of weathers. In such times, using a specialist payments provider can put your business in control, while also benefitting from their knowledge and experience of the market. Instead of being at the mercy of the markets, you can identify where the opportunities lie for you specifically, ride the currency storms that the economy may bring and feel safer in the knowledge that you are doing all you can to help your business, your suppliers and your customers.
Preparation is key, especially in such a volatile climate. Undoubtedly, ensuring financial systems are in order will stand you and your business in better stead to weather any difficulties - for the benefit of both your business’s finances and supply chain relationships.
Businesses interested in discovering more about Travelex should visit www.travelexbusiness.com/uk
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