Though the Australian dollar has strengthened in recent weeks, economic conditions remain favourable for Australian exporters.
And with free trade agreements now in place with our three largest Asian trading partners, more local companies are showing an interest in growing their business overseas.
However, Mark Hoppe, managing director, ANZ, Atradius, a leading credit insurance firm, warns exporters to protect themselves – especially when trading in markets they haven’t dealt with previously.
“Exporting can deliver success, but it’s important for business owners to have a thorough understanding,” Mr Hoppe says.
“There can be many benefits to exporting goods internationally, especially when the exchange rate is favourable. It not only opens up new markets and potential customers and also gives companies the opportunity to expand their business,” he says.
“Many export markets are considered less secure than the domestic market.”
Potentially risky customers
Mr Hoppe says it is important for exporters to know whom they are dealing with.
“Companies need ways to assess potentially risky customers in foreign markets before dealing with them,” he says.
“They also need ways to approach deals that are out of the ordinary for them without being exposed to additional risk.”
While it presents many opportunities, international exporting also presents a number of unique challenges. These include changes to other countries’ political landscape and regulatory systems, transfer risks, legal risks, and changes to terms of trade mid-way through a transaction.
Despite these risks, companies thinking of exporting to foreign markets can take several steps to protect themselves before they start trading with overseas customers.
Risks can be managed with discipline, and businesses thinking of exporting should actively implement a risk management plan, Mr Hoppe says.
Insuring against non-payment
“Exporting safely is all about being able to protect yourself from any number of variables that are likely to be out of you control.”
One of the most effective elements in a risk management plan is trade credit insurance.
“Basically, anyone who is shipping overseas can insure against non-payment,” says Mr Hoppe.
“That is, if the purchaser is unable to pay or refuses to accept the goods – or if there is an issue with currency.
“Trade credit insurance provides an extra layer of protection with which to wrap your business and trade safely with markets in other countries.”
High and dry
Much of the Australian market and, most local exporters, rely on trade credit.
However, if a customer can’t pay, or won’t pay for goods, companies can be left high and dry.
In some cases, it can close a business down.
“Trade credit insurance provides a cash flow buffer zone so that companies can trade confidently, no matter what the economic landscape looks like,” Mr Hoppe says.
But many exporters – particularly SMEs and new players – are unaware of this type of service.
Exporters should discuss various risk options with their insurance brokers, he says.
Large trade credit insurance firms like Atradius have representatives on the ground in key trading regions who can assist exporters regulatory issues, legal requirements, business culture, credit checks and debt collection.
To learn more visit: www.atradius.com.au